JAYAWANT SHIKSHAN PRASARAK MANDALs MBA PROGRAMME

Preliminary Examination: March-April 2011 MBA IIYear (Semester: IV) Subject: - Statergic Financial Management Date: - 01/04/2011 Marks:- 70

Day: Duration: - 3 Hrs. ______________________________________________________________________________ Instructions:1. 2. 3. 4. Answer both sections in same answer sheet. Unrecognizable handwriting will not be assessed. Slove any five questions from section I Section II is compulsory.

Section I
1. Explain in detail components of financial strategy. [ 8 marks] 2. What is ethical dilemma a finance manager faces? Explain the ethical economic combinations. [ 8 marks] 3. Explain dubious reasons for merger. [ 8 marks] 4. What is concept of EVA? What are the ways or ideas to reward shareholders? [ 8 marks] 5. What are the strategic pricing at different levels of PLC? [ 8 marks] 6. Explain how Nine References have role to play in strategic financial management. [ 8 marks] 7. What is corporate restructuring? What are symptoms of corporate restructuring? How such plan is drawn? [ 8 marks]

Section II
8. Excel Ltd. Is acquired by Excellent Ltd. On a share exchange basis. There selected data is as below; [15 marks] Sr. No 1 Particulars Profit after tax ( Rs. Lakh) Excellent Ltd 56 Excel Ltd 21

2 3 4

No of Shares (Lakh ) Earnings Per Share (Rs.) Price Earnings Ratio

10 5.6 12.5

8.4 2.4 7.5

Determine: a) Pre merger, market value per share b) Maximum exchange ratio Excellent Ltd should offer without dilution of EPS. 9. From the data given below of VC India Ltd., you are required to prepare economic value added statement for 2006 and 2007 and also comment on financial position based on EVA statement [15 marks] Summary income statements for the year: 2007 Rs. (000) Revenue Pretax accounting profit (Note 1) Taxation Profit after tax Dividends Retained earnings Summary balance sheet for the year ending: 2007 Rs. (000) Noncurrent assets Net current assets Total Assets Financed by: Shareholders funds Medium and long-term bank loans Total Assets 380 126 506 312 88 400 250 256 506 2006 Rs. (000) 192 208 400 608 134 (46) 88 (29) 59 2006 Rs. (000) 520 108 (37) 71 (24) 47

Note 1: After deduction of the economic depreciation of the companys Non-current assets. This is also the depreciation used for tax purposes. Other information is as follows: 1. Capital employed at the end of 2005 amounted to Rs.350m. 2. VC had non capitalized leases valued at Rs.16m in each of the years 2005 to 2007. The leases are not subject to amortization. 3. VCs pretax cost of debt was estimated to be 9% in 2006 and 10% in 2007. 4. VCs cost of equity was estimated to be 15% in 2006 and 17% in 2007. 5. The target capital structure is 70% equity, 30% debt. 6. The rate of taxation is 30% in both 2006 and 2007. 7 Economic depreciation amounted to Rs.64m in 2006 and Rs.72m in 2007. These amounts were equal to the depreciation used for tax purposes and depreciation charged in the income statements. 8 Interest payable amounted to Rs.6m in 2006 and Rs.8m in 2007. 9 Other noncash expenses amounted to Rs.20m per year in both 2006 and 2007. ---------------------------------------------- ALL THE BEST -------------------------------------------