(a) Tatu Ltd. wants to takeover Mantu Ltd. and has offered a swap ratio of 1:2...

  

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(a) Tatu Ltd. wants to takeover Mantu Ltd. and has offered a swap ratio of 1:2 (0.5 shares for everyone share of Mantu Ltd.). Following information is provided Tatu Ltd. *24,00,000 8,00,000 Exchange rates: Canadian dollar 0.666 per DM (spot) Canadian dollar 0.671 per DM (3-months) Interest rates: DM 7.5% p.a. Profit after tax Equity shares outstanding (Nos.) EPS PE Ratio Market price per share You are required to calculate: (i) The number of equity shares to be issued by Tatu Ltd. for acquisition of Mantu Ltd. (ii) What is the EPS of Tatu Ltd. after the acquisition? (iii) Determine the equivalent earnings per share of Mantu Ltd. (iv) What is the expected market price per share of Tatu Ltd. after the acquisition, assuming its PE multiple remains unchanged? (v) Determine the market value of the merged firm. (b) Following information is given: ₹3 10 times 730 Mantu Ltd. 74,80,000 2,40,000 Canadian Dollar - 9.5% p.a. To take the possible arbitrage gains, what operations would be carried out? (c) Write a short note on Real Estate Regulatory Authority (RERA). 72 7 times 14 (8 Marks) (8 Marks) (4 Marks) Question 3 (a) Herbal World is a small, but profitable producer of beauty cosmetics using the plant Aloe Vera. Though it is not a high-tech business, yet Herbal's earnings have averaged around 18.5 lakh after tax, mainly on the strength of its patented beauty cream to remove the pimples. The patent has nine years to run, and Herbal has been offered 50 lakhs for the patent rights. Herbal's assets include 50 lakhs of property, plant and equipment and 25 lakhs of working capital. However, the patent is not shown in the books of Herbal World. Assuming Herbal's cost of capital being 14 percent, calculate its Economic Value Added (EVA). (5 Marks) (b) SG Mutual Fund Company has the following assets under it on the close of business as on: Company No. of Shares Q Ltd. Ltd. R S Ltd. T Ltd. 2,000 30,000 40,000 60,000 1st August 2017 Market price per share 200.00 312.40 180.60 505.10 2nd August 2017 Market price per share ( 205.00 360.00 191.55 503.90 Total No. of Units issued by the Mutual Fund is 6,00,000. (i) Calculate Net Assets Value (NAV) of the Fund. (ii) Following information is also given: Assuming that Mr. Zubin, an investor, submits a cheque of 30,00,000 to the Mutual Fund and the Fund Manager of this entity purchases 8,000 shares of R Ltd; and the balance amount is held in Bank. In such a case, what would be the position of the Fund? (iii) Calculate new NAV of the Fund as on 2nd August 2017. (c) Discuss what you understand about Embedded Derivatives. (10 Marks) (5 Marks) (a) Tatu Ltd. wants to takeover Mantu Ltd. and has offered a swap ratio of 1:2 (0.5 shares for everyone share of Mantu Ltd.). Following information is provided Tatu Ltd. *24,00,000 8,00,000 Exchange rates: Canadian dollar 0.666 per DM (spot) Canadian dollar 0.671 per DM (3-months) Interest rates: DM 7.5% p.a. Profit after tax Equity shares outstanding (Nos.) EPS PE Ratio Market price per share You are required to calculate: (i) The number of equity shares to be issued by Tatu Ltd. for acquisition of Mantu Ltd. (ii) What is the EPS of Tatu Ltd. after the acquisition? (iii) Determine the equivalent earnings per share of Mantu Ltd. (iv) What is the expected market price per share of Tatu Ltd. after the acquisition, assuming its PE multiple remains unchanged? (v) Determine the market value of the merged firm. (b) Following information is given: ₹3 10 times 730 Mantu Ltd. 74,80,000 2,40,000 Canadian Dollar - 9.5% p.a. To take the possible arbitrage gains, what operations would be carried out? (c) Write a short note on Real Estate Regulatory Authority (RERA). 72 7 times 14 (8 Marks) (8 Marks) (4 Marks) Question 3 (a) Herbal World is a small, but profitable producer of beauty cosmetics using the plant Aloe Vera. Though it is not a high-tech business, yet Herbal's earnings have averaged around 18.5 lakh after tax, mainly on the strength of its patented beauty cream to remove the pimples. The patent has nine years to run, and Herbal has been offered 50 lakhs for the patent rights. Herbal's assets include 50 lakhs of property, plant and equipment and 25 lakhs of working capital. However, the patent is not shown in the books of Herbal World. Assuming Herbal's cost of capital being 14 percent, calculate its Economic Value Added (EVA). (5 Marks) (b) SG Mutual Fund Company has the following assets under it on the close of business as on: Company No. of Shares Q Ltd. Ltd. R S Ltd. T Ltd. 2,000 30,000 40,000 60,000 1st August 2017 Market price per share 200.00 312.40 180.60 505.10 2nd August 2017 Market price per share ( 205.00 360.00 191.55 503.90 Total No. of Units issued by the Mutual Fund is 6,00,000. (i) Calculate Net Assets Value (NAV) of the Fund. (ii) Following information is also given: Assuming that Mr. Zubin, an investor, submits a cheque of 30,00,000 to the Mutual Fund and the Fund Manager of this entity purchases 8,000 shares of R Ltd; and the balance amount is held in Bank. In such a case, what would be the position of the Fund? (iii) Calculate new NAV of the Fund as on 2nd August 2017. (c) Discuss what you understand about Embedded Derivatives. (10 Marks) (5 Marks)

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a Tatu Ltd wants to takeover Mantu Ltd and has offered a swap ratio of 12 05 shares for everyone share of Mantu Ltd Following information is provided ... View the full answer