Course: Strategic Financial Management
June 2023 Examination

1) Sun Ltd plans to invest INR 500,000 in a project with the following cash
flows: Cash flow after tax year 1 = INR 100,000
Cash flow after tax year 2 = INR 300,000
Cash flow after tax year 3 = INR 200,000
Cash flow after tax year 4 = INR 200,000
The discount rate is 5 per cent and the risk adjusted discount rate is 20 per cent.
Determine the NPV of the project using the risk adjusted discount rate. Will your
decision be the same if the risk adjusted discount rate is increased to 22 per cent?
(10 marks)
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2) Mergers and Acquisitions are a part of corporate restructuring exercises. Discuss
the different forms and types of mergers and acquisitions. (10 marks)

3) a) An investor purchases a August call option on Tata Motor’s stock, with an
exercise price of Rs. 440. Determine the intrinsic value today if Tata Motor’s stock
is trading at
i) Rs. 420
ii) Rs. 460 (5 marks)

3) b) Apple Ltd has deployed a capital of 400 million in Orange Ltd a 100 per cent
owned subsidiary company and it incurs a cost of 10 per cent. The after-tax profit
generated by the subsidiary company is INR 45 million. Compute the EVA
generated by the company? (5 marks)