Seat No. /Enrollment No.
___________
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER- IV - EXAMINATION-SUMMER-2024
Subject Code: 4549222 Date: 29/04/2024
Subject Name: Corporate Restructuring and Valuation
Time: 10:30 AM TO 01:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
4. Use of simple calculators and non-programmable scientific calculators are permitted.
Marks
Q.1 Define the following terms: 14
(a) Joint venture
(b) SER
(c) Liquidation Value
(d) ESOP
(e) Dividend Yield
(f) MPS, P/E Ratio
(g) Due diligence
Q.2 (a) What do you mean by corporate restructuring? Explain the various forms of 07
corporate restructuring.
(b) What do you mean by takeover & hostile takeover? Discuss the five 07
takeover defence tactics.
OR
(b) Discuss the types and motives of mergers. Why merger fails? Explain. 07
Q.3 (a) What do you understand by divestiture and what are the types and reasons of 07
divestitures.
(b) Vadham Limited’s earnings and dividends have been growing at a rate of 18 07
per cent per annum. This growth rate is expected to continue for 4 years. After
that the growth rate will fall to 12 per cent for the next 4 years. Thereafter, the
growth rate is expected to be 6 per cent forever. If the last dividend per share
was INR 2.00 and the investors’ required rate of return on Vadham’s equity
is 15 per cent, what is the intrinsic value per share?
OR
Q.3 (a) Explain the reasons and benefits of cross border expansions. 07
(b) Following data is provided for the Sundram co. ltd. For year 3, the year that 07
has just ended, and for the next year five years, year 4 through 8.
(in Million)
3 4 5 6 7 8
PAT 24 29 28 32 38 40
Fixed assets 190 220 240 266 294 324
Investments 25 10 - - - -
Net Current 70 75 88 90 100 109
Assets
Debt 134 140 150 161 177 192
Preference - - - - - -
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The cost of equity capital is given 18.27%. What is the value of the firm as
per FCFE Approach.
Q.4 (a) What do you mean by LBOs and Going private? Also explain the types of 07
LBOs.
(b) The ABC Ltd. has declared dividend during the past five years as follows: 07
Year 2010 2011 2012 2013 2014
Rate of 12 14 18 21 24
Dividend (%)
The average rate of return prevailing in the same industry is 15%. Determine the
value per share of Rs. 10 of ABC Ltd. based on Dividend Yield Method.
OR
Q.4 (a) Explain the valuation of Intangibles, Goodwill, Brands and human resources. 07
(b) The expected dividend per share on the equity share of RRR Limited is INR 07
2.00. The dividend per share of RRR Limited has grown over the past five
years at the rate of 5 percent per year. This growth rate will continue in future.
Further, the market price of the equity shares of RRR Limited, too, is expected
to grow at the same rate. What is a fair estimate of the intrinsic value of the
equity share of RRR Limited if the required rate is 15 percent?
Q.5 CASE STUDY:
The ABB Co Ltd. wants to acquire the ABC Ltd. by exchanging the 1.6 shares
for every share of ABC ltd. It anticipates to maintain the exiting P/E ratio
subsequent to the merger also. The relevant financial data are furnished as
below:
ABB Ltd. ABC Ltd.
Earnings after taxes (EAT)(INR) 1500000 450000
Number of equities shared 300000 75000
outstanding (N)
Market price per share (MPS) 35 40
(INR)
(a) What is the exchange ratio based on the market price? What is PE Ratio 07
premerger?
(b) What is expected market price per share of merged company? 07
OR
Q.5 (a) What is EPS of Company ABB ltd. after merger? What was PE ratio used in 07
acquiring ABC Ltd.
(b) What is the pre-merger EPS and P/ E ratio for cash equivalent? 07
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