Strategic Financial Management
1. From the following details supplied by Amaya Plastics ltd. you are required to:
a. Calculate the Net Present Value
b. Calculate the Discounted Payback Period
For each Capital Expenditure proposal given below:
|Details||Proposal A||Proposal B|
|Initial Cost||Rs. 20,00,000||Rs. 15,00,000|
|Expected life||10 years||8 years|
|Cash flows before tax after depreciation||Rs. 3,00,000 each for first four years Rs. 2,00,000 for next 6 years||Rs. 2,00,000 each for first five years Rs. 3,00,000 for last three years|
|Estimated scrap value||Rs. 50,000||Rs. 1,00,000|
The discounting factor is 12% and tax rate 30%.
2. Kailash Ltd. Earns Operating Profit (EBIT) of Rs.1,80,00,000 at existing capital structure. You are required to calculate financial leverage and EPS with the help of following information
|Particulars||Amount in Rs|
|13.5% Debentures ( FV 100)||4,00,00,000|
|15% Cumulative Preference Shares( FV 100)||1,00,00,000|
|Equity Share Capital ( FV 10)||3,00,00,000|
Tax rate 35%
3. A) Naysha Ltd. has the following capital structure as on 31st March, 2017
|10% debentures (before tax) (Rs)||300000|
|9% preference shares (Rs)||200000|
|Equity shares of Rs.100 each||500000|
The equity shares of the company are quoted at Rs.102 and the company is expected to declare a dividend of Rs.9 per share for the year. Tax rate is 40% required.
Calculate the cost of capital.
3. B. Discuss the cheapest form of raising long term finance with reference to Question 3 (A) and state the reasons for the same.