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M&A- Illustration 29
AFM
answered on 16-Jul-23 22:27
Hello Sir, In Part-2 of this problem, while computing the value of the companies together why have we not considered the new shares issued (1,25,000) to arrive at the value of AFC Ltd?
latest answer
price per share of afc post merger is 102 102 is arrived at by dividing 11.51 cr / 11.25 lacs 11.25 lacs includes 1.25 lacs new shares issued
Suresh Avinash
CA Final
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518
M&A- Illustration 25
AFM
answered on 15-Jul-23 23:19
Hello Sir, In this problem when computing MP of the share under alternative-1 we have considered the EBITDA multiple pre and post merger to be same.
latest answer
Yes - pre merger the multiple is 8.03 they acquire target at multiple of 7 POst merger whole business gets valued at 8.03 This is why a lot of companies do merger so that the new business gets a higher multiple Byjus was also doing this in its hey days of acquisition - ut was valued using revenue multiple and it git a higher multiple valuation than what it was acquiring the targets for
Suresh Avinash
CA Final
★ 3K+
1
440
Corporate Valuation- Illustration 23
AFM
answered on 15-Jul-23 08:30
Hello Sir, What is the reason behind adding back PV of dividend per share for the years 3-5 to the price computed using DDM with yr-6 dividend? Will this price will not take into the effect of years 3-5 dividends?
latest answer
When you compute price based on the year 6 dividend. the price discounts dividends of the future i.e dividends from year 6 till infinity Hence dividends of years 3-5 have to be manually added to the price arrived at by using D6
Suresh Avinash
CA Final
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2
517
Corporate Valuation- Illustration 16
AFM
answered on 14-Jul-23 00:23
Hello Sir, In the question, it is mentioned that the PE ratio will reduce by 8 times but we have considered PE ratio to be 8 times. Is the question wrongly worded?
latest answer
Thank you sir
Suresh Avinash
CA Final
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2
458
Corporate Valuation- Illustration 13
AFM
answered on 13-Jul-23 22:28
Hello Sir, Why have we not considered short term loans in Net Working Capital computation? If we consider it in our computation, the total of ST Loan and Payables will not add up to 540 as we assumed the proportionate increase is constant across all the items of current assets and current liabilities. Also, since the dividend payout is there which leads to reduction in cash of 14.4, will still the assumption holds good of cash being increased?
latest answer
This is actually a badly drafted Q. Have purposely excluded ST loans as part of NWC as usually funding is provided for NWC in form of ST loans
Suresh Avinash
CA Final
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1
522
Security Analysis - Technical analysis
AFM
answered on 13-Jul-23 10:13
Dow theory states that if the cyclical swings of the stock market averages are successively higher and the successive lows are higher , then the market trend is up and a bullish market exists. Contrarily , if the successive highs and successive lows are lower, then the direction of the market is down and a bearish market exists. what does this mean ?
latest answer
Not even opened a demat account 🤣🤣🤣 Currently I'm only reading books like "One upon wall street" and "Intelligent Investor".
SAI CHANDANA KONKA
CA Final
★ 6K+
5
518
International Financial Management- Illustration 12
AFM
answered on 10-Jul-23 12:04
Hello Sir, In this problem, we have taken the depreciation amount for the scenarios based on the percentage of decline in USD INR exchange rate but the decrease in cost of production given in the question is not in line with the decrease in exchange rate i.e., 10% of current COP 6 whereas they have given as 0.3.
latest answer
You may have costs that are partially linked to USD - say total cost is 100 of which 30 is linked to USD and 70 is not ... so the impact will be only on 30... like that there could be several scenarios because of which direct correlation may not be possible
Suresh Avinash
CA Final
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1
452
International Financial Management- Illus 1
AFM
answered on 09-Jul-23 07:56
Hello Sir, In illustration-1, can you kindly explain the reason for the recovery of working capital at the end of the project
latest answer
Discussed this over the call. MOney that you put in as WC, in the beginning, is withdrawn once you close or liquidate a business. Eg you start a provision shop with 1 lac as inventory. that 1 lac is an investment in WC - when you close down that shop that inventory is liquidated
Suresh Avinash
CA Final
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1
554
Corporate Valuation- Illustration 11
AFM
answered on 09-Jul-23 07:57
Hello Sir, In this problem- are we considering stable period as terminal value? But in the problem, they have not mentioned the number of years in stable growth?
latest answer
Explained this over the call A = PV of Terminal CF as at end of year 4 = FCF year 5 / ( Ke-g) PV of Terminal CF at year 0 = PV of A discounted from year 4 to year 0
Suresh Avinash
CA Final
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7
474
Corporate Valuation- Illus 2
AFM
answered on 06-Jul-23 20:35
Hello Sir, In computing earnings value of the company- we capitalised EBITDA value however we did not add surplus funds to it. However we have added that to the enterprise value which is computed based on EBITDA multiple.
latest answer
M cap ( Eqshare x Price per share) = EV - Debt + surplus funds - this is for case 2 IN part 1 they have asked earnings value - what is earnings value is not clear as they have ot given wacc but given Ke only I explained that propably they are referring to EV in first part of the Q - hence we are not removing debt - if we dont remove debt we dont need to add cash also becuase we are not computing Mcap as explained in formula in line
Suresh Avinash
CA Final
★ 3K+
1
432