QUIZ 2

Mergers, Acquisitions and Corporate Restructuring

Name..
Roll No.
Note: Just write one word/Figure answer. No need to show the calculations. Each
Question carries 2 marks each. No marking for steps.
Time allowed : 30 Minutes

Q 1Cash Flow at the end of explicit forecast period (5 years)= 25 L , Growth rate
after explicit forecast period 7%, Cost of capital 17%, Find out the present value of
the continuation value.

Q 2 A ltd has the following data. EBIT= 30,000, PAT = 10,200, Pre tax Cost of Debt =
12%, Cost of equity 24%, Debt to assets ratio = 0.6,Total capital invested=
1,20,000, Shares Outstanding= 8000, Tax Rate 35%. Find out the EVA.

Q 3 In Q 2, if the industry PE multiple is 14x, find out the expected price of the
above company

Q 4 Sales = 3200, EBIT Margin 12%, Depreciation 34, Increase in deferred taxes 2,
CAPEX +Net inc in Working capital = 42.5, Corporate Tax Rate 35%, Find out FCFF

Q 5 If in the above question, Interest expense charged to P& L Account is 19, and
during the year debt has increased by 20, find out the FCFE

Q6 If forecasted FCFE for the next five years are as follows:

Year 1
Year 5

10

Year 2
60.5

25.5

Year 3

30.6

Year 4

45.9

Present value of the continuation value is 400.8, Cost of Debt (Pre tax) = 12%, Cost
of equity 18%, Tax Rate is 35%, Find out the total value of the equity.

Q 7 Capital Employed = 1000 Crores.

Debt Equity Ratio = 20:80, Debt carries 15%(Pre tax) rate of interest. Tax Rate =
35%. Cost of Equity = 18%, EBIT = 300Cr.
Find out EVA

Following are the forecasted FCFF for the next four years
Year 1

50.8

Year 2

65.9

Year 3

89.8

Year 4

100.6

Growth rate is expected to be 8% after the explicit forecast period. Cost of Debt
(after tax) is 12%, Tax rate is 35%, Cost of equity is 20%. Debt to equity ratio is
60:40.
Q 8 Find out the Continuation value

Q 9 Present value of the continuation vale

Q 10 Enterprise Value