Solution 12.

3
EPS Growth rates 17.5 6.3829787234 8 9.26

% Growth 17.5 6.38

0.118034
16-18 11.80%

16-20 0.102042

18-20 0.086278
8.60%

Solution 12.1

O/S 100

Option Proceeds 800 (80*10)

Shares repurchased 6.67

Net new shares from options 3.334

Total Fully diluted o/s shares 100+3.333

Solution 12.2

Cuurent Price 120

O/S shares 100

Amt o/s 750

Conversion Price 55

New shares 13.63

Fully Diluted shares 116.96

Solution
1 100
1.5 90
1 100
IV 96 96+20%

Q33 Avg. Ratio Revenue Mkt Value

Market/ revenue 3 1 100 100
Market / Book 4.5 1.5 60 90
Market / Income 60 20 5 100
Intrinsic Value 96.66667

Q32 Avg. Price

A B A*B
Price /EBDIT 20 19 22 20.33 20 406.6

Price to Book value 4 3 2 3 75 225

Price to Sales 4 3 5 4 500 2000

877.2
Q32
SK AS XY Average XY (given) Assumption there is no debt
Mkt Value / Book Value 1.125 1.333333 1.229 250 307.25
Mkt Value / Replacement cost 0.75 0.727273 0.7385 500 369.25
Mkt/ sales 0.82 0.888889 0.853 500 426.5
Mkt/ After Tax EBIT 25 25 25 14 350

363.25

Ex 11.3 Sheeba A B C D
EV 20000 25000 15000 30000
EBITDA 1500 2000 750 1000

Mn(Rs)
XYZ LTD EBITDA 50
Calculate EV using EV/EBITDA

Soultion
EV/EBITDA 13.33 12.5 20 30
Average 18.9575

XYZ Ltd 947.875

Example 13.1
P/E( Industry) 15
Earnings per share 9
Price = p/E *E 15*9
135

Example 11.1
Dividend 1
D1 1.05
P0 20
Ke 0.1025

Example 11.4 P/E P/BV BV/Sales BV/EBITDA

Avg trasaction multiples 19.4 5.2 4.4 14.8
EPS (last quarter) 8 42 5000 2000
Price 155.2 218.4 22000 29600
EPS(last fY) 6 4000 4000
116.4 18000 25600
120 120
150 213

VF= VE VD

EBITDA 100 66.7

Dep 10 3.33
EBIT 90
Interest 10
EBT
Tax 30
EBIT(1-t) 60

Cashoutflow 180
Cashflow 40
ccost of capital 14%

NPV CashoutflowPV of cash inflow

180 40*PVIFA(14%, 10)
180 ₹ 208.64
NPV ₹ 28.64 Pv of cashinflow-PV of cashoutflow

CF1 CF2 CF3

 (1+r)^1 (1+r)^2 (1+r)^3

1 2 3
CFF 40 40 40
Cost of capital 14% 1.14 1.14 1.14

35.0877193 30.7787 26.998860648 92.86528 VF

I II
EBIT 1000 1000
Interest 100 0
EBT 900 1000
Tax @20% 180 200 Tax saving 20 100(T) 100*.2
PAT 720 800

Cost of equity

Cost of capital Equity Debt

Cpst of equity
CAPM Rf Beta Rm Rf
5 1.5 10
12.5
Cost of debt Kd(1-t) 8 0.4 4.8 OR 8
Debt equity
Cost of capital 30% 70%
1.44 8.75
Cost of capital 10.19

Perpetuity
P.V of perpetuity CF/ Ko

CF 4
Ko 0.1019
Value of the firm 39.2541708

Multi period stage ( example) Example

Periods 1 2 3 4 5 till infinity
CFs 2 3 4 5 6 4
Ko 0.1019 0.1019 0.1019 0.1019 0.1019 0.1019

PV of CF 1.81504674 2.470796 2.989740139 3.391574 3.693519 39.25417

39.25
VF
Value of Firm 38.5224456

Multi period stage ( example)

Periods 1 2 3 4 5 From 6Th
Cfs 2 3 4 5 6 6
Ko 0.102 0.102 0.102 0.102 0.102 0.102
PV of cashflows 1.81488203 2.470348 2.988926309 3.390343 3.691843 58.82353
58.82353
Value of Firm 1.81488203 2.470348 2.988926309 3.390343 3.691843
PV of TV 36.19237

Value of Firm 50.5487139

Multi period stage ( example) Forecasted period

Periods 1 2 3 4 5 From 6th
CFS 2 3 4 5 6 6
Ko 0.1 0.1 0.1 0.1 0.1 0.1
P. V of cash flows 1.818 2.479 3.005 3.415 3.726 60
60
PV of terminal Value 37.25528

VF Sum of the P.V CFS PV of the TV

VF +
Value of Firm 51.699

Cost of debt
Net proceeds 100
Redemption value 110
Interest 10%
Tax arate 40%
Tenure 5

6
Rv-Bo 10
Rv-Bo/N 2
Rv+Bo/2 105
 EPS 9
Analysis P/E 15
Price 135
IV CMP Gretaer BUY
IV CMP Lesser Sell
IV CMP Equal Neutral , HOLD

Ebit 100
int 0
ebt 100
tax 20
pat 80

Assumption there is no debt

 20

3.2 4.8

0 1 2 3 4
40000

till infinity
 1 2 3 4
10
0.1
PV of perpetuity 100 100
75 75.13148

1
5
0.1
PV of perpetuity 50

2021
100

th Perpetuity 600000
Growth rate 10%
PV of Growing perpefcff (1+g)/ko-g CF (1+g)/Ko -g

Fcfe(1+g)/ke-g D1/Ke-g

Ke Do(1+g)/Ke-g
PV of the TV Po= D1/ke-g
CAPM

CF/Ko
1.380952
1.113592
0.113592
15
115
0.244027
WACC Weights
Rf 5
Beta 1.5
Rm 10
CAPM Ke 12.5 0.7 R(R) Rf+Beta(Rm-Rf)
12.5
Cost of debt Kd 8 Kd 8
0.4 0.4
Kd(1-t) 4.8 0.3 Kd(1-t) 4.8

WACC 10.19

PV Perpetuity CF/Ko

FCFF 4 mn

Value of the firm FCFF/WACC 39.25417 mn

10.2 D P1-P0 Total return InvestmentBeta Returns

Cement 3 20 23 30 0.8 23.25
Steel 3 15 18 45 0.7 22.1
Liquor 3 80 83 55 0.5 19.78
Govt. Sector 150 15 165 1000 0.99 25.45
289 1130
CAPM -= Rf +Beta (Rm-
Rm = 0.255752
D Price chan Total absolute retun P0 Return(secBeta Rf
Cement 3 20 23 30 0.766667 0.8 0.14
Steel 3 15 18 45 0.4 0.7 0.14
Liquor 3 80 83 55 1.509091 0.5 0.14
Govt. Sector 150 15 165 1000 0.165 0.99 0.14
289 1130 0.255752

WACC Qty Mkt. Price MV Weights Cost

Bond 5000 1050 5250000 52.43 5.40%
Equity 2500000 62500 65 3125000 31.21 13.90%
Preferred Stock 20000 35 700000 6.99 12.50%
Retained E 750000 937500 9.36 12.00%
10012500
MV of Equi 4062500 Equity R.E
3125000 937500
 Tax
8 3.2 4.8

CAPM -= Rf +Beta (Rm-Rf)

R(R)
0.23260
0.22103
0.19788
0.25459
Illustration 1
FCFF 1 2 3 4 5 6 7
g 0.05 0.05 0.05 0.05 0.05 0.05
Revenues 3 3.15 3.3075 3.472875 3.646519 3.828845 4.020287
Less : Operating Expenses 1 1.05 1.1025 1.157625 1.215506 1.276282 1.340096
EBITDA
Dep 1 1 1 1 1 1 1

EBIT 1 1.1 1.205 1.31525 1.431013 1.552563 1.680191

Tax rate 36%
0.64
Tax 0.36 0.396 0.4338 0.47349 0.515165 0.558923 0.604869
EBIT(1-t) 0.64 0.704 0.7712 0.84176 0.915848 0.99364 1.075322
Add: Dep 1 1 1 1 1 1 1

FCFF 1.64 1.704 1.7712 1.84176 1.915848 1.99364 2.075322

Illustration 2 1 2 3 4 5
EBIT 500 525 551.25 578.8125 607.7531
Growth 5 5 5 5 5
 8
0.05
4.221301
1.4071

1 1

1.814201

0.653112
1.161089 0.64 0.704 0.7712 0.84176 0.915848 0.99364 1.075322
1

2.161089
2
 FCFF
FCFF 1 Years 1
Growth rate 5
Revenues 3
Less: Operating Expenses 1
EBITDA 2
Depriciation 1
Less: EBIT 1
Tax rate 0.36
EBIT (1-t) 0.640

Add : Depriciation 1

FCFF 1.640

Working Notes
Depriciation Cost of machine 10
Salvage Value 2
8
Period 8
Dep/ Yr 1

FCFF 2
0 1
EBIT 500 525
Growth(%) 0.05 0.05
Tax rate 0.36 0.36
EBIT(1-t) 320 336
Add: Depriciation 200 210
Less:capex 300 315
Less : Change in WK 87.5

FCFF 220 143.50

Working Notes
Capex 300 315
Growth(%) 0.05 0.05

Depreciation 200 210

Growth(%) 0.05 0.05
Calculation of WK
Revenues 7000 7350
Growth ( 0.05 0.05
0.25 0.25
W.K (25% of revenues) 1750 1837.5
Change In WK 87.5

Initial Growth phase Stable Growth Phase

ROA 25% 18%
D/E 1 1
Int. Rate 12% 10%
Payout Ratio 24% ?
Growth rate ? 10%

Tax Rate 40%

b 0.76
i(1-t) 0.072
ROE
RoA-i(1-t) 17.80%
0.178
43%
G 0.32528
GROWTH ESTIMATION (SESSION)
Growth In earnings
Equity reinvestment
Less
Capital expenditure dep.
1000 100

Beta Leveraging session

Beta D/E
1.1 0.24
1.22 0.33
1.35 0.22
1.2 0.2

Average 1.2175 0.2475

BL
Unlevered beta of comparable firms Avg Beta Avg. D/E
Bul 1.2175 0.2475
Unlevered Beta 1.05
AB &CO
Beta 1.206 Answer
Unl. Beta 1.05
1-t 0.64
New D/E 0.23

Question 2
Tax rate 33%
D/E ratio 1.65%
Current Beta 0.9

Calculate
Beta @ 10% debt / equity

20% debt /equity

1-t 0.67
D/E 0.0165
Beta 0.9
B(UL) 0.8902

10% 0.95

20% 1.01

Example 11.14 Case : Change in gearing Ratio

D/(E+D) 0.10
Debt /Equity 0.11
Levered Beta 1.25
1-t 0.65
(1-t)*D/E 0.07
1+A125 1.07
Bu 1.17

Bl
New D/E 0.25
0.16
1.16
Bl 1.36
Debt Ratio D/D+E .1/.1+.9
0.2

Example 11.13 Case : Different Business divisions

D/E ?
Tax rate 0.35
Bl ?
Bu(Weighted Average )
Weights Operating income

Example 11.14
Acquirer Bl Bu

Target Bl Bu

Weighted avarge Bu
Merged Bl ?

Aquirer Target
Bl 1.27
D/E 0.45
T 0.35
1-t 0.65
D/E*(1-t) 0.29
1+A167 1.29
Bu 0.98

Illustration 8
Multi Stage Growth period 0.15
Year Cashflows Discount Rate
1 -10 1.150
2 5 1.323
 3 10 1.521
4 15 1.749
5 20 2.011
P> of cashflows for forecast period
6
Terminal Value
Ko 8%
G 5%
FCFF(1+g) 21
Terminal Value 700

P.V of TV 348.0

Value of firm 368.20

ke
Beta 0.9
Rf 0.054
Rm-rf 0.04
Ke 0.09
Roe 0.12
Payout ratio 0.700
Retention ratio (b) 0.3003
G=b*Roe 0.0358
Dividend 2.19
D1=D0(1+g) 2.268
Ke-g 0.05
Ve / share 41.873 Intrinsic /Fundamental

CMP 37
Stock
Two stage DDM
Payout 0.4
Retention (b) 0.6
D/E 1
RoA 0.15
T 0.4
1-t 0.6
i 0.08
RoE 0.252

G 0.1512

Rf 0.07
Market Premium 5%
Beta 1.3
Ke 0.135

High Growth Phase

5.7 Payout ratio=.4, EPS*.4
Year EPS Dividends
1 6.56 2.62
2 7.55 3.02
3 8.70 3.48
4 10.01 4.00
P.V of dividends during the high G. Phase
Stable Phase
Payout Ratio=.683
5 10.8 7.38
Beta 1.15
Ke 0.1275
G 0.08
Terminal Value 155.29 at the 4th year

P.V of TV 93.577

P.V of stock = 103.027

Numerical 2 Forecasted Period Steady Period

Beta 1.07 1
Rf 0.055 0.055
Rm-RF 0.06 0.06
Ke 0.1192 0.115
Kd 0.05 0.04
Weights (E) 0.9 0.9
Weights (D) 0.1 0.1

WACC 0.11228 0.1075

Forecasted Period
1 2
EBIT 1375 1512.5
Growth 0.1 0.1
Tax rate 0.35 0.35
EBIT(1-t) 893.75 983.125
Reinvestment/CAPEX 313.5 344.85
FCFF 580.25 638.275
PV of Cash flows 521.676 515.917
PV of TV

Value of Firm 9408.993

Numerical 3 11.23%
Forecasted Period
1 2
EBIT 1375 1485
Growth 0.1 0.08
Tax rate 0.35 0.35
EBIT(1-t) 893.75 965.25
Reinvestment/CAPEX 313.5 338.58
FCFF 580.25 626.67
PV of Cash flows 521.676 506.536

PV of TV 7438.19

Value of Firm 8949.127

Economic Value Added

Numerical 1

EBIT 2000000
Tax rate 35%
1-t 0.65
EBIT(1-t) 1300000
Capital employed 750000
WACC 0.1
Ke 0.15 0.5
Kd 0.05 0.5
Capital charge 75000
EVA 1225000

Numerical 2 Forecasted Perio

0 1
EBIT 1000 1100
Growth(%) 0.1 0.1
Tax Rate 0.35 0.35
1-t 0.65 0.65
EBIT(1-t) 650 715
WACC 0.1 0.1
Total Capital Emplyed 500 537.5
Growth 0.075
Capital Charge / cost of capital 53.75

EVA 661.25

P.V of EVA 601.136

Terminal Value

P.V of TV

Value of Firm (EVA)

CONSIDERATION

Numerical 1

Value of Alpha (A) 25

Value of Gama (T) 16

Consideration 18.25 19.05

Consideration FV+AP
Acquistion Premium 2.25

Cost savings 4 20

Expenses 0.8

3.05

Net Benefit 0.95 0.949999999999999

Numerical 2
AAL (A) 20

KEL(T) 12

Consideration 14

Premium 2
Cost savings 3

Expenses 0.4

Net Benefit 0.6 Cost savings -(AP+Expenses )

Numerical 3

Star Ltd 75

Moon Ltd 20

Cost Savings 30 Acquirer

Consideration 28

Acquition Premium 8

Gain to Moon Ltd 8

Net Gain to Star Ltd 22

Numerical 4

Value of A 200

Value of B 50

Consideration 65

Premium 15

Cost Savings 25

The value of the combined Firm 275 Va+Vb+cost savings

The cost of Merger for firm A 15 Acq. Premium+ expenses on deal

NPV to Bltd 15 Acquisition Premium

NPV to Altd 10 Savings -Cost of merger

Numerical 5
 No. of shares Price
Consideration Paid 246000 65
Cost Savings

O/S shares
Day Ltd 800000

New shares issued to night ltd 246000

Total Shares 1046000

Nights Ltd stake in combined entity 0.2352

Combined value of firm 79000000

No. of shares Price
Value of D ltd 800000 65

Value of Nltd 500000 30

Savings

P.V of night Ltd 18579350

Value of Night 15000000

Cost of Night Ltd 3579350

Numerical 6

Ke 0.136666666666667

D1 1

Po 15

Growth 0.07

Case II
Growth rate 0.08

P1 19.059

Benefit
Target firm 15

Price offerred 19.059

Benefit /Per share 4.059
No. of Shares 2000000

Total benefit 8118000

B)
Stock price paid 17

Market Value 15

Premkium per share 2

No. of shares 2000000

Total Premium/ Cost 4000000

C)

2000000

No. o shares issued 666666.666666667

Total Shares (Acquirer) 6666666.66666667

Target Firm's stake in combined firm 0.1

Value of acquirer 288000000

Value of Target 30000000
Benefit 8118000
Value of combined firm 326118000

Value of target 32611800

Cost of acquistion 2611800

Synergies and EPS dilution and accretion

Numerical 1

EPS
Total earnings 1,000,000
Total earnings of the combined firm 900,000
Synergy 100000

No. of O/ S share 25000

No. of shares of acquirer 20000
No. of shares issued to target firm 5000

Price of acquirer 80

Price to be paid to target 40

Exchange ratio 0.5

Post merger EPS 40

Numerical 2

Post merger EPS 2.75

NO. of O/S shares

Acquirer's shares 150000

Target Firms shares ???????

Total earnings 675000

No. of shares EPS
Earnings of Acquirer ltd 150000 2.25

Earnings of target firm 150000 2.25

Total Number of shares in combined firm 245455

No. of O/s shares of acquirer 150000

No. of shares issued to target firm 95455

Ratio 0.64

Numerical 3
A T
Earnings 250,000 72500
No.of shares 110000 20000
Market Price per share 52 64

a)
Consideration 85
Fair Value 64
Premium 21

b)
Exchange Ratio 1.635

c)
No. of new shares issued 32692

d)
Post merger EPS of combined Firms 2.260

Total earnings 322,500

Toatl Noi. Of shares o/S post acquistion 142692

e)
Pre merger EPS 2.27
f)
Pre merger P/E 22.88

g)
Post Merger Share price 51.7112668463612

h)
Ownership distribution

Acquirer Stake 0.77

Target stake 0.23

Numerical 4
a)
EPS post merger 2.83

Earnings of acquirer and target 1700000

No. of shares o/S 600000

b)
Change in EPS

Acquirer 0.132

Target -0.190

Market Value of post merger firm

Market Value of firm 23800000

No. of shares 600000

Market price 39.67

Acquirer firm (P/E) 14

EPS 2.83

d)
The gain accrued to Acquirer's shareholders

Post merger market value

15866666.6666667

14000000 1866667

Post merger market value of target firm

7933333

7000000

Gain to the shareholders of the target firm 933333

Numerical on Consideration

Consideration for AcquirerA

Tax Rate 0.35

Ke 0.12

Combined Ke 0.15
Offer price 85/share
Forecasted Period
1 2
2001 2002

Gain 650 550

Ke =.15 565.217391304348 415.879017013233

TV

PV of TV

NPV of the Synergy Gain(1) 2745.43

Loss to acquirer A 175 155

156.25 123.565

PV of TV

PV of net loss to A in case B acquires C 1170.015

Total Consideration paid by A

FV 85

Synergy Gain/ share 27.454

Opportunity cost/share 11.700

Total Consideration to be paid 124.154

Acquisition by B
Ke 0.14
1 2
125 134

Ke 109.649122807018 103.10864881502
PV of TV

Synergy Gain 1119.6

Ke 0.11 0.11
Loss 55 45

49.5495495495496 36.5230094959825

PV of Opportunity cost 263.153817207871

Synergy Gain /Share 11.196302158906

Opportunity cost /Share 2.63153817207871

Consideration 85

98.8278

Numerical 2

Ko (A) 0.1

Ko (T) 0.12

Ko(C) 0.115

Tax rate 0.35

EBIT (A) 350

EBIT(T) 175

Synergy 75

Reinvestement Rate 0.5

g (post acquisition ) 0.045

EBIT EBIT (1-t)

0.35
A 350 227.5
T 175 113.75

C 600 390

Value of Synergy Gain 1174

 2 3 4 5 6 7 8
0.05 0.05 0.05 0.05 0.05 0.05 0.05
3.15 3.31 3.47 3.65 3.83 4.02 4.22
1.05 1.10 1.16 1.22 1.28 1.34 1.41
2.1 2.205 2.315 2.431 2.553 2.680 2.814
1 1 1 1 1 1 1
1.1 1.205 1.31525 1.4310125 1.552563125 1.680191 1.814201
0.36 0.36 0.36 0.36 0.36 0.36 0.36
0.704 0.771 0.842 0.916 0.994 1.075 1.161

1 1 1 1 1 1 1

1.704 1.771 1.842 1.916 1.994 2.075 2.161

2 3 4 5
551.3 578.8 607.8 638.1
0.05 0.05 0.05 0.05
0.36 0.36 0.36 0.36
352.8 370.4 389.0 408.4
220.5 231.5 243.1 255.3
330.8 347.3 364.7 382.9
91.9 96.5 101.3 106.4

150.68 158.21 166.12 174.43

330.75 347.2875 364.651875 382.884469

0.05 0.05 0.05 0.05

220.5 231.525 243.10125 255.256313

0.05 0.05 0.05 0.05
 7717.5 8103.375 8508.54375 8933.97094
0.05 0.05 0.05 0.05
0.25 0.25 0.25 0.25
1929.375 2025.84375 2127.13594 2233.49273
91.875 96.46875 101.292188 106.356797

Increase in working capital

200 1100
-400 Debt
700 Equity
1-t (1-t)*D/E 1+(1-t)*D/E
0.64 0.1584 1.1584

1.206

0.1472 1.147

D/E
.1/.9
.2/.8

Target New Entity

DCF Value W Bu W*Bu D/E
A 500 0.76923077 0.982 0.755385
T0 150 0.231 0.834 0.192654
650 0.948039 0.6

0.834

PV of CFS TV
-8.70
3.78
 6.58
8.58
9.94 700
20.18

DPS/EPS 0.4
 DPS EPS*0.4

Ke=13.5%
P,v of Dividends
2.313
2.346
2.379
2.413
9.450

0 1 2 3 4 5 6
Growth 0.1512 0.1512 0.1512 0.1512 0.08 0.08
Ke= 13.5 13.5 13.5 13.5 12.75 0.1275
Beta 1.3 1.3 1.3 1.3 1.15 1.15

7.83
155.29

asted Period Perpetuity

3 4
1663.75 1730.3
0.1 0.04
0.35 0.35
1081.4375 1124.695
379.335 394.5084
702.1025 730.1866
510.221
10817.5792592593
 7861.17928901578

11.23% 10.75%
asted Period Perpetuity
3 4
1574.1 1637.064
0.06 0.04
0.35 0.35
1023.165 1064.0916
358.8948 373.250592
664.2702 690.841008
482.728

10234.6816

0.075
0.025
0.1

Forecasted Period Terminal phase

2 3 4 5 6
1210 1331 1464.1 1610.51 1610.51
0.1 0.1 0.1 0.1 0
0.35 0.35 0.35 0.35 0.35
0.65 0.65 0.65 0.65 0.65
786.5 865.15 951.665 1046.8315 1046.8315
 0.1 0.1 0.1 0.1 0.1
577.81 621.15 667.73 717.81 717.81
0.075 0.075 0.075 0.075 0
57.781 62.115 66.773 71.781 71.781

728.72 803.04 884.89 975.05 975.05

602.247 603.332 604.393 605.429

9750.50

6054.293569685

9070.831
-(AP+Expenses )

TC FV+AP

TC-FV AP

m+ expenses on deal
15990000 15000000 990000
12000000

52000000

15000000

12000000
 Revernue 2000000 2000000
costs 1000000 900000

337500

337500
asted Period TV
3
2003 2004

350

230.130681351196

350
2333.333333

1534.204542

134 134

95.37855 1116.67

794.821

3 4
165

111.370300173333 1178.571429
 795.5

0.11
24

17.5485931512228 218.1818182
159.532665

Reinvestment rate FCFF Valuation

0.5
113.75 113.75 1137.5
56.875 56.875 473.96

195 195 2785.71

1100
-500
-100
700
Tax Bl

0.35 1.318
D/E D/D+E
0.111 0.1
.2/.8 0.2

CF/Ko-g
CCFE/Ke-g
D6/Ke-g

7
0.08
0.1275
1.15
FCFF
Periods 1 2 3
Revenue 3 3.15 3.31
Growth Rate(%) 0.05 0.05 0.05
Operating Expenses 1 1.05 1.10
EBITDA 2 2.1 2.21
Less :Depriciation 1 1 1
EBIT 1 1.1 1.21
Tax rate 0.36 0.36 0.36
EBIT(1-t) 0.64 0.704 0.77
Add: Depriciation 1 1 1
FCFF 1.64 1.704 1.771

Working Notes
Depreciation
Asset Value 10
Salvage Value 2
Asset value used 8
No. of Years 8
Depriciation for the year 1

Illus tartion 2
0 1 2 3
EBIT 500 525 551 579
Growth rate (%) 0.05 0.05 0.05 0.05
Tax rate 0.36 0.36 0.36 0.36
EBIT(1-t) 320 336 352.8 370.44
Capex 300 315 331 347
Depreciation 200 210 220.5 231.525
Less : change in WK 88 92 96
FCFF 220 143.5 150.7 158.2

WC
Revenues 7000 7350 7717.5 8103.375
WK 1750 1837.5 1929.375 2025.84375
Increase in WK 88 92 96

Illustration 10.8
 Weights
Bonds 9000 300 2700000 6.26
Pre.shares 5000 90 450000 1.04
Equity 500000 80 40000000 92.70
514000 470 43150000

Illustration 10.9
Qty Mp/share MV Weights
Bonds 5000 1050 5250000 0.52
Common Stock 62500 65 3125000 0.31
Prefrred Stock 20000 35 700000 0.07
Retained Earnings 937500 0.0936

Book vales Mkt Value

Equity R.earnings Equity
Stock 4062500 2500000 750000 3125000

Earnings growth estimation

Numerical 1
G
b
RoE
b=1-payout ratio 0.6
Payout ratio 0.4
RoE
i 0.08
t 0.4
1-t 0.6
i(1-t) 0.048
RoA 0.15
RoA-A75 0.102
D/E 1
D/E*A77 0.102
RoA+A79 0.252
RoE 0.252
g=B*RoE 0.1512
Growth 15.12%
b)
Payout Ratio ?? 1-retention1-b
b ??
G br
g/r b
Growth 0.08
RoE
i 0.08
t 0.4
1-t 0.6
i(1-t) 0.048
RoA 0.15
RoA-A75 0.102
D/E 1
D/E*A77 0.102
RoA+A79 0.252
RoE 0.252
b 0.31746031746
Payout Ratio 0.68253968254

Illustration 2 Initial Phase Stable phase

RoA 0.25 0.18
D/E 1 1
Int. Rate 12 10
Payout ratio 24 ?
Growth rate ? 10
Tax Rate 0.4 0.4

G br
b=1-payout 1-.24 0.76
RoE
1-t 1-.4 0.6
i(1-t) 0.12 0.072

RoA-i(1-t) 0.178
D/E 1
RoA-i(1-t) 0.178

RoE 0.428
b 0.32528

B)
Payout Ratio?
1- retention ratio 1-b
b ?
G br
G/R b
Growth 0.1
RoE
t 0.4
1-t 0.6
i 0.1
i(1-t) 0.06
RoA-i(1-t) 0.12
RoA 0.18
D/E 1
D/E*A137 0.12
RoA+A140 0.3 RoE
b 0.33
Payout Ratio=1-b 0.67

Beta Estimation
Numerical 1
Industry Average Beta 1.2175

Industry D/E 0.2475

Bl Bu t D/E
1.2175 ? 0.36 0.2475

1-T 0.64
D/E*A154 0.158
1+A155 1.158
Bu 1.05

Ab&Co.
Bl
D/D+E 0.23 Debt Ratio Debt /Debt +Equity
D/E 0.299
T 0.36
(1-t)*D/E 0.191
1+A164 1.191
Bl 1.252

Numerical 2
Old Debt ratio 0.1

Bl 1.25

T 0.35

New debt Ratio 0.2

1-t 0.65

D/E(old) 0.11
D/E*A177 0.072

1+A181 1.072

Bu 1.1658

Bl
New D/E 0.25

(1-t)*new D/E 0.1625

1+A190 1.1625

Bl 1.3552

Numerical 3

Acquirer Beta 1.27

Target Beta 0.97

D/E(A) 0.45

D/E(T) 0.25
t 0.35

Bu(A) 0.982

Bu(T) 0.83

Bl (AT)

DCF Values Weights Bu Bu*W

500 76.92 0.982 0.7558
150 23.08 0.834 0.192
650 0.948

Bl 1.318

Numerical 4
Operating Y W Bu W*Bu
A 5000 0.109 0.77 0.084
P 11250 0.246 0.72 0.177
S 13950 0.305 1.12 0.341
F 5175 0.113 0.55 0.062
M 5175 0.113 1.07 0.121
D 5225 0.114 1.02 0.116
45775 1
0.902

D/E 0.3
T 0.35
1-t 0.65
(1-t)*D/E 0.195
1+A235 1.195

Bl 1.078

Two Stage DDM

G
b
RoE
b=1-payout ratio 0.6
Payout ratio 0.4
RoE
i 0.08
t 0.4
1-t 0.6
i(1-t) 0.048
RoA 0.15
RoA-A75 0.102
D/E 1
D/E*A77 0.102
RoA+A79 0.252
RoE 0.252
g=b*RoE 0.1512
Growth 15.12%
b)
Payout Ratio ?? 1-retention ratio
b ??
G br
g/r b
Growth 0.08
RoE
i 0.08
t 0.4
1-t 0.6
i(1-t) 0.048
RoA 0.15
RoA-A75 0.102
D/E 1
D/E*A77 0.102
RoA+A79 0.252
RoE 0.252
b 0.31746031746
Payout Ratio 0.68253968254
Forecasted Period
0 1 2 3
Growth 0.1512 0.1512 0.1512
Payout ratio=DPS/EPS 0.4 0.4 0.4
EPS 5.7 6.56184 7.554 8.696
DPS 2.625 3.022 3.478
Ke 0.135 0.135 0.135
Rf 0.07 0.07 0.07 0.07
Market Prem. (Rm-Rf) 0.05 0.05 0.05 0.05
Beta 1.3 1.3 1.3 1.3
CAPM(Rf+beta(Rm-rf)

PV of Dividends 2.31 2.35 2.38

P.V of Terminal Value

Pvof the ETN Ltd

Numerical 2
Beta 1.07 1
Rf 0.055 0.055
Rp 0.06 0.06
Ke 0.1192 0.115
Kd 0.05 0.04
Wd 0.1 0.1
We 0.9 0.9
WACC 0.11228 0.1075

Forecasted Period
1 2 3
Growth 0.1 0.1 0.1
EBIT 1250 1375 1512.5 1663.75
Tax rate 0.35 0.35 0.35 0.35
EBIT(1-t) 893.75 983.125 1081.4375
Less: Capex 285 313.5 344.9 379.3
FCFF 580.3 638.3 702.1
Ko 0.1122 0.1122 0.1122
PV of FCFF 521.71 515.99 510.33
Terminal Value 10817.58
P.V of Terminal 7862.88

Value of Firm 9410.91

EVA Approach
Numerical 1
NOPAT EBIT(1-t)

Capital employed 750000

Cost of Capital 0.1

ke 0.05 0.5 0.025
Kd 0.15 0.5 0.075
0.1
EBIT 2
Tax rate 0.35
1-t 0.65
EBIT(1-t) 1.3 0.025
Wacc 0.1
Capital employed 0.75
Capital Charge 0.075 0.075
EVA 1.225

MVA (Market Value added) increasing if EVA is positive

Numerical 2 Forecasted Period

0 1 2 3
EBIT 1000 1100 1210 1331
Growth Rate (%) 0.1 0.1 0.1
EBIT(1-t) OR NOPAT 715 786.5 865.15
Tax Rate 0.35 0.35 0.35
WACC 0.1 0.1 0.1
Capital employed 500 537.5 577.81 621.15
Growth Rate (%) 0.075 0.075 0.075

WACC * Capital Employed 53.75 57.781 62.115

EVA 661.25 728.72 803.04

PV of EVA 601.1364 602.246900826 603.332198535

Terminal Value of EVA

P.Vof TV

Value of firm ( EVA)

Consideration

Numerical 1

Value of alpha (A) 25

Value of Gama (B) 16

Consideration 18.25 AP+FV Consideration

16+x 18.25
Acquisition Premium 2.25 0.8 3.05

Savings 4 4

Expenses 0.8

Net savings 3.2

Synergy to acquirer 0.95 95000 0.95

Numerical 2
In (crores)
AEL (A) 20

KEL(T) 12

Consideration 14

Savings 3

Expenses 0.4

Acquisition Premium 2
Consideration = AP +FV
Total Net Synergies 0.6

Numerical 3

Star ltd(A) 75

Moon Ltd(T) 20

Cost Savings 30

Consideration 28

Acquisition Premium 8

NPV to Moon Ltd 8

NPV To Star Ltd 22 22

Numerical 4

A ltd 200

B Ltd 50

Cost savings 25

Consideration 65

Acquisition Premium 15

A) Value of the combined firm

VA+Vb+Savings 275

B) Cost of the merger 15

C) NPV to B's shareholder 15

D) NPV to A's shareholde 10

Numerical 5

O/s number of shares of Day Ltd 800,000.00

The no. of shares issued to Night ltd 246,000.00

Total number of shares (post acquisition) 1,046,000.00

Days share 0.765

Night's Stake 0.235

Value of Combined Firm 79000000

No. of o/S sharesPrice /share
Value of Day 800000 65 52000000

Value of Night Ltd 500000 30 15000000

Savings 12000000

B)
Consideration 18579350

Value of Night Ltd 15000000

Cost 3,579,350

C)
NPV to Night Ltd 3579350
D)
NPV to Day Ltd 8420650

Numerical 5
Target Firm
D1 1

Po 15

g 0.07

Ke 0.1367

Post Merger
D1 1.08
g 0.08
Ke 0.1366667
Price of target firm 19.06
No. of the shares o/S 2,000,000

Benefir of acq. To the target firm 4.06

Total Benefit 8117647

b)

Csh payment 17
Total Cash payment 34,000,000

Value of Target firm 30,000,000

Cost to Acquirer 4,000,000

C)
No. of shares issued to starlight 666667

Total shares o/S post merger 6666667

Al hasan Shares 6000000

New share issue 666667

% stake of Starlight in combined firm 0.1

%stake of Al hasan 0.9

Value of combined firm 326117647

A (A) 6000000 48 288000000

V(T) 2000000 15 30000000
Benefits of merger 8117647.1

Cost of acquisition Consideration (less) FV

32611764.7059 less 30000000

2611764.7

EPS accretion and Dilution

EPS*P/E Price Shareholders wealth

Increase EPS post merger combined EPS

post merger EPS Pre merger EPS accretion

post merger EPS < Pre merger EPS EPS dilution

Numerical 1

A ltd 80

T Ltd 40

Exchange ratio 0.5 0.5

A ltd shares 20000

Pre merger shares of T Ltd 10000

Tltd shares (post merger) 5000

Total Number of O/s shares 25000

Combined earnings 900000

Synergy gains 100000

Combined earnigs post merger 1000000

Post merger EPS 40

Numerical 2
Mona Sona
EPS 2.25 2.25

No. of shares (Pre merger) 150000 150000

Market Price per share 18 12

Post merer EPS (combined ) 2.75

Combined earnings 337500 337500 675000

Combined No. of shares 150000+x

Total Number of shares = Combined Earnings /EPS 245454.5

No. of shares of acquirer 150000

No. of shares issued to Target (post acquisition) 95454.5454545

Exchange ratio 0.636

Numerical 3
Acquiring Co. Target Co.
Earnings 250,000 72500
No.of shares 110000 20000
Market Price per share 52 64
Consideration 85
a) Purchase Price premium
Consideration- Fv 21

b) The exchange ratio 1.6346

c) New shares issued by acquirer to target 32692

d) Post merger EPS of the combined firm 2.26

Post merger Earnings 322,500

Post merger no. of shares 142692

e) Pre merger EPS 2.27

Pre merger p/E ratio 22.88

Post merger P/E 22.88
Post merger share price 51.71

Stake (A) 0.77088948787

Stake (T) 0.22911051213

Numerical 4

Tax rate 35%

FV / share of target 85
Ke (A) 0.12

Ke(AT) 0.15

No. of O/s shares 100

CONSIDERATION TO BE PAID BY A
Post acquistion 1 2 3 Terminal

Gains 650 550 350 350

0.15 565.217391304 415.879 230.130681351 2333.33333333

pv of TV 1534.20454234

Total Gain (PV) 2745.43163201

Loss to acquirer to A 175 155 134 134

0.12 156.25 123.5651 95.378553207 1116.66666667

PV of TV 794.821276725

PV of Opprtunity Loss 1170.01488095

Consideration 124.15 124.15

FV 85
Acquisition Premium 39.15
Synergy Gain/share 27.5
Efficiency gain 0
Opportunity Loss 11.70
Non controlling interest 0

Numerical 5 Reinvestment rate =.5

Tax rate 0.35
Oprating PrEBIT(1-t) Capex
Acquirer 350 227.5 113.75

Targte 175 113.75 56.875

Combined Firm 600 390 195

Value of combined firm 1695

VF(A)+Vf(T) 1611.45833333

Synergies 83.5416666667

Numerical6

a)

PAT 1000000 700000

Shares O/S 400000 200000

EPS 2.833

EPS 2.5 3.5

Change (%) 13 -19.04762

P/E 14

EPS (post Merger) 2.833

MPS(post Merger) 39.6667

Market Value of Firm 23800000

MPS 39.667

No. of O/s shares 600000

Gain accruing to shareholders

Acquirer
Market Value
Premerger 400000 35 14000000

Post Merger 400000 39.662 15864800

Gain 1864800

Target Firm
Premerger 200000 35 7000000

Post merger 200000 39.662 7932400

Gain to Target Co, shareholders 932400

 4 5 6 7 8
3.47 3.65 3.83 4.02 4.22
0.05 0.05 0.05 0.05 0.05
1.16 1.22 1.28 1.34 1.41
2.32 2.43 2.55 2.68 2.81
1 1 1 1 1
1.32 1.43 1.55 1.68 1.81 1
0.36 0.36 0.36 0.36 0.36 Tax 0.36
0.84 0.92 0.99 1.08 1.16 EBIT(1-T) 0.64
1 1 1 1 1 OR
1.842 1.916 1.994 2.075 2.161 0.64

in lakhs
4 5
608 638
0.05 0.05
0.36 0.36
389.0 408.4
365 383
243.10125 255.2563
101 106
166.1 174.4

8508.54375 8933.971
2127.1359375 2233.493
101 106
 Costs Weights*Costs
5.4 2.83
13.9 4.34
12.5 0.87
12.0 1.12
9.17 WACC We*Ke+Wd*Kd+Wp*Kp
Mkt Value
Retained Earnings
937500
/Debt +Equity
 Stable Phase
Terminal Value
4 5
0.1512 0.08 P.V of growD5/Ke-g
0.4 0.683
10.011 10.812
4.004 7.379
0.135 0.1275
0.07 0.07
0.05 0.05
1.3 1.15

2.41 155.35
155.35

93.61

103.06

Perpetuity
4
0.04
1730.3
0.35
1124.695
394.5
 730.2
0.1075

asted Period Terminal Value

4 5 6
1464.1 1610.51 1610
0.1 0.1 0
951.665 1046.832 1046.5
0.35 0.35 0.35
0.1 0.1 0.1
667.73 717.81 771.65
0.075 0.075 0.075

66.773 71.781 77.165

884.89 975.05 969.33

604.392830386 605.4294
9693.349

6018.807

9035.345
2.700
vestment rate =.5
Ko VF
FCFF
113.75 0.1 1137.5

56.875 0.12 473.9583

195 0.115 1695.652
 FCFE (3) 1 2 3 4
FCFF 80000 104000 135200 175760
Growth (%) 0.3 0.3 0.3 0.3
Interest 32000 32000 32000 32000
Tax Rate 0.36 0.36 0.36 0.36
Less: Int(1-t) 20480 20480 20480 20480
Less: Debt Repayment 0 0 0 0

FCFE 59520 83520 114720 155280

Ke 0.15 0.15 0.15 0.15
P.V of CFS 51756.52 63153.12 75430.26 88781.84
Value of equity 472782.9

Ke 15%
Value of Equity
Working Notes
Pricipal 400000
Int. Rate 8%
Interest 32000

Growth rate estimation

High Growth Phase
Illustration 4 G ?
b 0.76
payout ratio 0.24
RoA 0.25
Roe=?
D/E 1
i 0.12
t 0.4
1-t 0.6
i(1-t) 0.072
Roa-i(1-t) 0.178
D/E*Roa-i(1-t) 0.178
Roe=? 0.428
b*Roe 0.32528

Stable Phase
Payout ratio
1-Retention ratio
g= b*Roe
 Roe
G/Roe = b
Retention Ratio 1-payout
Payout 1-retention
G b*Roe
G/Roe = b
G/Roe = retention ratio
G 0.1
Roe 0.3
b 0.33
Payout 0.67

Illus
b 0.6
RoA 0.15
D/E 1
i 0.08
t 0.4

RoE
i(1-t) 0.048
RoA-i(1-t) 0.102
D/E*A67 0.102
RoA+A68 0.252 RoE
G 0.1512
0.1512

Payout Ratio
b ?
RoA 0.15
D/E 1
i 0.08
t 0.4
i(1-t) 0.048
RoA-i(1-t) 0.102
RoA+A68 0.252
G 0.08
b 0.32
Payout Ratio 0.68
68.30%

Beta Calculation
Beta 0.85
D/E 0.2
Tax rate 0.35
1-t 0.65
D/E(1-t) 0.13
1+A92 1.13
Bu 0.752

New D/E 0.25

Bl 0.874
Question 2
D/E 0.23
Avg.Beta 1.2175
Avg. Debt /Equity 0.2475

BL 1.2175
D/E 0.2475
Taxrate 0.36
1-t 0.64
0.1584
1+A107 1.1584
Bu 1.05 for comparable firms
Bl 1.21 Equity Beta

DDM
Illus
b 0.6
RoA 0.15
D/E 1
i 0.08
t 0.4

RoE
i(1-t) 0.048
RoA-i(1-t) 0.102
D/E*A67 0.102
RoA+A68 0.252
G 0.1512
0.1512

Payout Ratio
b ?
RoA 0.15
D/E 1
i 0.08
t 0.4
i(1-t) 0.048
RoA-i(1-t) 0.102
RoA+A68 0.252
G 0.08
b 0.32
Payout Ratio 0.68
68.30%

Forecasted Period
0 1 2 3 4
Growth(%) 0.1512 0.1512 0.1512 0.1512
Payout Ratios 0.4 0.4 0.4 0.4
EPS 5.7 6.56 7.55 8.70 10.01
DPS 2.62 3.02 3.48 4.00
Ke 0.1350 0.1350 0.1350 0.1350
Rf 0.07 0.07 0.07 0.07 0.07
Market Prem. (Rm-Rf) 0.05 0.05 0.05 0.05 0.05
Beta 1.3 1.3 1.3 1.3 1.3

CAPM=Rf+beta(Rm-rf)

P.V of dividends 2.31 2.35 2.38 2.41

Terminal Value 154.781

PV of TV 93.2682

Ve 102.72

Numerical 2 Forecasted Period Terminal Period

0 1 2 3 4
beta 1.07 1.07 1.07 1
Rf 0.055 0.055 0.055 0.055
Risk Premium 0.06 0.06 0.06 0.06
Ke 0.1192 0.1192 0.1192 0.115
We 0.9 0.9 0.9 0.9
Kd 0.05 0.05 0.05 0.04
Wd 0.1 0.1 0.1 0.1

WACC 0.11228 0.11228 0.11228 0.1075

FCFF estimation

EBIT 1250 1375 1485 1574.1 1637.064

Growth 0.1 0.08 0.06 0.04
Taxrate 0.35 0.35 0.35 0.35 0.35
EBIT(1-t) 893.75 965.25 1023.165 1064.092
Less Capex 285 313.5 338.58 358.8948 373.2506
FCFF 580.25 626.67 664.2702 690.841

P.V CFs 521.6762 506.5364 482.7279 1510.94

Terminal Value 10234.68

P.V of TV 7437.585

Value of firm 8948.526

Economic Value ADDED

Numerical 1
EBIT 2,000,000
Tax Rate 0.35
EBIT(1-t)/NOPAT 1300000

Cost of Capital 0.1

Equity 0.075 0.5 0.15
Debt 0.025 0.5 0.05

Capital Employed 750,000

Capital Charge 75000

EVA 1225000

Numerical 2
0 1 2 3 4
Growth rate 0.1 0.1 0.1 0.1
EBIT 1000000 1100000 1210000 1331000 1464100
Tax rate 0.35 0.35 0.35 0.35
EBIT(1-t) 715000 786500 865150 951665
WACC 0.1 0.1 0.1 0.1
Total Capital Emplyed 500000 537500 577812.5 621148.4 667734.6
Growth rate (K) 0.075 0.075 0.075 0.075

Capital Charge 53750 57781.25 62114.84 66773.46

EVA 661250 728718.8 803035.2 884891.5

Present Values 601136.4 602246.9 603332.2 604392.8

TV

PV of TV 6020865.58741182

Vf (EVA) 9037403.23776453

CONSIDERATION

Numerical 1
PV of Alpha (A) 2,500,000
PV of Gamma (T) 1,600,000

Cost Savings 400,000

Expenses for merger 80,000

Total Consideration 1,825,000

TC FV+AP
FV 1600000
Acquisition Premium 225,000
AP+Expenses 305,000
GAIN 95,000

Numerical 2
AAL (A) 20

KEL(T) 12

Cost Savings 3

Expenses of Merger 0.4

Net savings 2.6

Consideration 14

AP 2

Net Gain 0.6

Numerical 3

Star Ltd(A) 75
Moon Ltd(T) 20

Consideration 28

Cost Savings 30

Acquisition Premium 8

Gain To Acquirer 22

Gain to the Target 8

Numerical 4

A Ltd (Acquirer) 200

B ltd (Target) 50

Consideration 65

A. Premium 15

Cost savings 25

a)
A+B+Cost Savings 275

b) 15

NPV to A 10

NPV of B 15

Numerical 5

Day Ltd (A) 800000

Night Lts( T) 246000

% stake of Day Ltd 0.764818355640535

% stake of night ltd 0.235181644359465

Total o/s in combined entity 1046000

Consideration paid to night Ltd 18579349.9043977

Combined Value of the firm 79000000

Value of Day Ltd 52000000

Value of Night Ltd 15000000

benefits 12000000

Acquistion premium 3579349.9043977

NPV to day Ltd 8420650.1

NPV to night Ltd 3579349.9

Numerical 6

Acquirer

Tax rate 35%

FV 85/ share

Ke 0.12

Ke (combined firm) 0.15

No. of shares of target firm 100 mn

1 2 3 TV
2001 2002 2003 2004

Gain in Net income 650 550 350 350

PV of Gain 565.22 415.879 230.1307 2333.333

PV of TV of gain 1534.205

PV of Total Gain 2745.43

Loss to acquirer A 175 155 134 134

Ke =
P. V of Loss to acquirer A 156.25 123.5651 95.37855 1116.667

PV of TV 794.8213

PV of Loss to acquirer in case of ac 1170.0

Consideration

FV 85

AP
a) Synergy gain/ share 27.45

b) opportunity loss / share 11.70

Consideration 124.154465129625

Consideration to be paid by B ?????????

Reinvestment Rate
Numerical 6 t 0.35 0.5
EBIT EBIT(1-t) Capex FCFF Ko
Acquirer 350 227.5 113.75 113.75 0.1

Target 175 113.75 56.875 56.875 0.12

Combined Firm 600 390 195 195 0.115

Value of combined Firm 1695.7

less : Value of A 1137.5

less: Value of B 473.96

Synergy 84.194

EPS accretion and Dilution

Numerical 1
A ltd (Price) 80
No. of sshares of A ltd 20000
T Ltd 40
No. of shares of T ltd 10000
Combined Earnings 900000

Reduction in costs 100000

Post Merger EPS

Net Income
Combined Income 900000
Benefit of acquition 100000
Post merger incone 1000000
Exchange Ratio 0.5
new shares issued to target firm 5000

O/ shares of the combined firm/ po 25000

(Acquirer shares+ new shares issued to target)

post Merger EPS 40

Numerical 2
A T
Eps 2.25 2.25

MPS 18 12

P/E ratio 8 5.3

No. of shares 150000 150000

Post merger EPS 2.75

Post merger no. of shares 150000+x

Post merger earnings

Combined Earnings EA+Et+benefits

Ea 337500
Et 337500

Combined Earnings 675000

Total no. of shares o/s 245455

Acquirer's shares 150000

Target Company shares 95455

Exchange ratio 0.636

Numerical 3
Acquiring Target
Earnings 250,000 72500
No.of shares 110000 20000
Market Price per share 52 64

a)
FV of T ltd 64

Consideration 85

Purchase price premium 21

b)
Exchage Ratio 1.63
FV+AP 85
FV 52

C)
The no. of new shares issued by the 32692.3
D)
Post merger EPS 2.26

ppost merger earnings 322,500

E)
Pre merger EPS 2.27
F)
Pre merger P/E 22.88

G)
Post merger share Price 51.71

H)
post merger ownership distribution

Acquirer 0.77
.
Target 0.23
 5 6
307580 538265
0.75 0.75
32000 32000
0.36 0.36
20480 20480 EBITDA 1000 1000
0 400000 Dep 100 100
EBIT 900 900
287100 117785 int 100 0
0.15 0.15 EBT 800 900
142739.4 50921.71 Tax 200 225
PAT 600 675
 Stable
5
0.08 Perpetuity
0.68 Growth
10.81 Growing perpetuity
7.35 P.V of Growing perpetutiy CF/Ke-g
0.1275
0.07
0.05
1.15

9.45

Terminal Period

Reinvestment /EBIT(1-t)
893 983
 313.5 344.85
35.10638 35.08138

5 6
0.1
1610510 1610510
0.35 0.35
1046832 1046832
0.1 0.1
717814.7 771650.8
0.075 0.075

71781.47 77165.08

975050 969666.4

605429.4
9696664
Vf
1137.5

473.9583

1695.652
 675000 =
2.75
150000+x

675000/2. = 150000+x
245455 = 150000+x
Synergy Gain
1 2 3 TV
650 550 350 350
0.15 0.15 0.15
565.22 415.88 230.13 2333.33
Synergy gain 0.00 0.00 0.00 1534.202 2745.43
27.45429

172 155 134 134

WACC 0.12 0.12 0.12
153.5714 123.5651 95.37855 1116.667
794.8213
NPV of loss A 1167.336 11.67336

Total Consideration Value

FV 85
NPV 27.454
NPV of loss 11.67
124.124