Sem: Dec-2024 Maximum Marks: 50 Examination: End Exam Date: Duration: 2.5hrs
Programme code: 18 Programme: MBA for Working Executive	Class: FY	Semester: III Batch- 2023-24
College: K. J. Somaiya Institute of Management	Name of the department/Section/Center: Finance & Law
Course Code:	Name of the Course: Corporate Finance
Instructions: Note- i) Solve all the questions ii) Candidates are allowed to use MS Excel for calculations

Question No.	Max. Marks
1	You have been asked to appraise Multisoft Limited, for which the following information has been assessed: The base year (Year 0) Information Revenues 320 million EBIT 90 million Capital Expenditure 100 million Depreciation 60 million Working capital as a percentage of revenue 20% Corporate tax rate (for all time) 0 percent Inputs for the High Growth Period Length of high growth period 5 years The growth rate in revenue, depreciation, EBIT and capital expenditure 40% Working capital as a percentage of revenue 20% Tax rate will increase to 30% Cost of debt (pre tax) 15% Debt equity ratio 1:1 Risk free rate 12% Market risk premium 7% Equity beta 1.3 Inputs for the Stable Growth Period Expected growth rate in revenue, EBIT, Capex, and depreciation 10% Debt equity ratio 0.5:1.0 Working capital as a percentage of revenues 20% Cost of debt (pre-tax) 13% Tax rate 30% Risk-free rate 11% Market risk premium 5% Equity beta 1 What value of firm would you put on Multisoft Limited on the basis of DCF method?	14
2.	The balance sheet of Veena Enterprise is as follows: Liabilities Amount Assets Amount Equity share capital 60,000 Fixed assets 1,50,000 Retained Earnings 20,000 Current Assets 50,000 10% Long term debt 80,000 Current liability 40,000 2,00,000 2,00,000 The company’s total assets turnover ratio is 3, its fixed operating cost are Rs 1,00,000 and its variable operating cost ratio is 40%. The income tax rate is 30%. Calculate for the company the different types of leverages given that the face value of the share is Rs 10. The company earns Rs 5 per share, is capitalized at a rate of Rs 10 %, and has a rate of return on investment of 18%. According to Walter’s model, what should be the price per share at 25% dividend payout ratio? Is this the optimum payout, according to Walter?	8 4
3	(a) MN Ltd is planning an expansion program which will require Rs 30 crores and can be funded through one of the three following options: (a) Issue further equity shares of Rs100 each at par. (b) Raise loan at 15% interest (c) Issue preference share at 12% Present paid-up capital is Rs 60 crores, and the average annual EBIT is Rs 12 crores. The assumed income tax rate is 50%. After the expansion, EBIT is expected to be Rs 15 crores per annum. Calculate EPS under the three financing plans and recommend which plan should be selected by the company. Compare the advantages and disadvantages of debt financing versus equity financing. Under what conditions might a firm prefer one over the other?	8 4
4	ABC Ltd earned INR 4,00,000 after taxes in 2023 and paid out 50 per cent of its earnings as cash dividends. The market price of the equity is INR 7 per share. The equity capitalization account is as follows: Common equity (INR 1 par value 1,00,000 shares) INR 1,00,000 Additional paid-in capital INR 50,000 Retained earnings INR 2,50,000 Total equity INR 4,00,000 If the company declared a stock dividend of 4 percent, what would be the new structure of the shareholder’s equity account? Assume that the company pays no stock dividend. What would happen to the earnings per share for 2023? What would be the dividends per share? If 5 percent stock dividends are declared, what would be the EPS and the DPS? A company has an EPS of ₹12 and its closest peer is trading at a P/E ratio of 22x. Another peer has an EV/EBITDA multiple of 8x, with EBITDA of ₹150 crore. (a) What is the estimated price of the company’s stock using the P/E ratio? (b) Calculate its enterprise value using the EV/EBITDA multiple.	8 4