The Shruthi Avinash Exports Ltd's capital structure is as under:

10% Debenture 2.75 crores

12% Preference shares 2.25 crores

Equity shares (face value:10 per share) 5crores

10.00 crores

Additional information:

(i) 100 per debenture redeemable at par has 3% floatation cost and 10 years of

(ii) 100 per preference share redeemable at par has 2% floatation cost and 10 years

(iii) Equity share has5 floatation cost and market price per share of27. The current

maturity. The market price per debenture is

of maturity. The market price per preference share is106.

dividend is2 per share with annual growth of 5%. The firm has a practice of

paying all earnings in the form of dividends.

(iv) Corporate Income-tax rate is 35%.

The company is considering two independent projects available for expansion. Each

has repeatable in nature as detailed below. The capital structure remains the same

year Project A Project B

0 (99,990,000) (26,400,000)

1 56,461,000 3,102,000

2 37,796,000 3,520,000

3 16,465,000 3,102,000

4 16,465,000 17,160,000

5 7,999,200 16,280,000

6 1,333,200 3,982,000

i. Which project would you recommend under i) NPV, ii) Profitability Index and

iii) MIRR? Why?

ii.Which is the best tool? Why?

• Linda needs to have $50,000 in eight year, how much would she have to invest today, if she earns 10 percent annually on her money? How much would she have to put away annually to have $50,000 in eight years?

• Which of these two bonds first the highest current yield? Which one has the highest yield to maturity?
  • A 7 percent, 20-year bond quoted 101.000
  • A 10 percent, 30-year bond quoted at 105.00

Suppose you want to retire in exactly 30 years. At that time, you wish to have $500,000 in your retirement account. If the applicable rate is 5.78%, compounded monthly, how much would you need to put into the account at the end of each month to meet your goal?Jacqueline is 25-year old now. If she earns 6% on savings of $3,000 a year, how much will her retirement fund be by age 65?

• Please refer to worksheet 14.1: Estimating future retirement Needs. Assume Jared and Trish Roberts needs 26,792 each year for the first 20 years after their retirement, and 20,000 each year for the next 5 years, re-compute the amounts for Line N and Line Q. Other information has no change.

Finance Simulation: M&A in Wine Country

1.What are some key financial differences between the three companies in the simulations?

2.What are the strategic justifications, both offensive and defensive, for a merger or acquisition in the U.S. wine industry in general? What are the strategic justifications for your specific firm to undertake a merger (either as acquirer or target) within the economic context of the simulation? That is, what are the pros for your firm to either acquire or be acquired by another firm?

3.Value Bel Vino and Starshine using market multiples. How did you decide which comparable companies to include in your analysis?

4.What primary advantages does your company bring to the table in a potential merger or acquisition?

5.What sources of synergy are possible in your two potential transactions?

6.What are the reservation values you calculated for Bel Vino and Starshine? Briefly justify your reservation prices. Please include a screen shot (or copy+paste) of the final valuation spreadsheets used to calculate your reservation price.

7.What is your initial strategy? Specify your choice of merger partner and offer price.

8.What is the rationale behind the choice of target (or acquirer, if appropriate) for your opening bid and your overall bidding strategy? The answer to this question should include a justification of your opening bid (or ask, if appropriate) price per share.