Strategic Financial Management
Action Investor LLP, is a Private Equity (PE) firm with 46% stake in OPS Ltd. Along with the stake, the PE firm also has a board seat and veto power on major financial
Q.1. Mr. Das is a CFO of ABC Ltd. The Company proposes to establish overseas subsidiaries in European countries to expand its business. However before any final decision, Mr. Das has to make detailed report on following points
(a) Tax implication exchange gain & loss and capital investment
(b) Incentive available for export business
(c) Other important tax related matters
Prepare brief note on the above three (3) points. (10 Marks)
Q.2. Action Investor LLP, is a Private Equity (PE) firm with 46% stake in OPS Ltd. Along with the stake, the PE firm also has a board seat and veto power on major financial decision of the Company. The performance of OPS Ltd is far below expectation over past two years & the PE firm believes that there is need to look at various restructuring steps. What are different types of restructuring that PE firm can propose in board meeting?
Q.3 a) SFL Ltd. is considering launching of new product to supplement its existing range of product. As per the projection done by the finance team, there will be initial capital investment of Rs. 70 lakhs in current year. After that the first year will need capital infusion of Rs. 1 Crs. Below are the after tax cash inflow projection;
Year 2: Rs. 25 lakhs
Year 3: Rs. 30 lakhs
Year 4: Rs. 35 lakhs
From 5th year onwards the cash inflow will be Rs. 40 lakhs through out till end of 10th year.
The Company expects the new product shelf life to be of 10 years.
Assuming 15% discount rate what will be the NPV of this new project . Based on your NPV calculation, whether launching of this new product line is acceptable or not?
Q.3. b) MNP Ltd has recorded earnings before interest and tax (EBIT) of Rs. 50 Crs for FY17. The Company has outstanding debt of Rs. 10 Crs and pays 10% interest on its debt. Applicable tax rate for the Company is 30%. What is the valuation of MNP Ltd if the expected return on its equity shares is at 18%? (5 Marks)
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