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M&A- Illustration 25

SFM

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

Suresh Avinash

CA Final

2K+

1

114

Corporate Valuation- Illustration 23

SFM

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

Suresh Avinash

CA Final

2K+

2

158

Corporate Valuation- Illustration 16

SFM

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

Suresh Avinash

CA Final

2K+

2

113

Corporate Valuation- Illustration 13

SFM

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

Suresh Avinash

CA Final

2K+

1

95

Security Analysis - Technical analysis

SFM

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

SAI CHANDANA KONKA

CA Final

3K+

5

143

International Financial Management- Illustration 12

SFM

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

Suresh Avinash

CA Final

2K+

1

109

International Financial Management- Illus 1

SFM

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

Suresh Avinash

CA Final

2K+

1

121

Corporate Valuation- Illustration 11

SFM

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

Suresh Avinash

CA Final

2K+

7

144

Corporate Valuation- Illus 2

SFM

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

Suresh Avinash

CA Final

2K+

1

114

Mutual Funds- Ill 23

SFM

answered on 05-Jul-23 07:18

Why the dividend amount is reduced from the total return in computing the increase in NAV? Will dividend do not impact the increase in NAV?

latest answer

There is total increase in value of investments to the tune of ₹45K Of that return, some is paid to you in the form of Increase in units ( dividend reinvestment) and some in form of increase in NAV Hence we are removing that dividend amount ( which is reinvested so that yo get more units) to compute the amount that is in the form of increase in NAV Please watch forst 5 minutes carefully again and let me know if you have still not understood

Suresh Avinash

Suresh Avinash

CA Final

2K+

1

109

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