Dear students, get fully solved assignments by professionals
Do send your query at :
or call us at : 08263069601
(Plagiarism proofed assignments available with 100% surety and refund)
Strategic Financial Management
Dec 2025 Examination
Q1. A firm is considering a strategic acquisition of a competitor. The target company has the following projected free cash flows (in Rs. lakh) for the next 5 years: Year 1: 120, Year 2: 140, Year 3: 160, Year 4: 180, Year 5: 200. After Year 5, free cash flows are expected to grow perpetually at 6% per annum. The acquirer’s weighted average cost of capital (WACC) is 14%. However, due to integration risks, the acquirer wants to apply a 2% risk premium to the WACC for the terminal value calculation only. The acquisition will require an immediate investment of Rs.1,000 lakh, and an additional Rs.200 lakh in Year 2 for restructuring. Calculate the maximum price the acquirer should pay for the target company using the Discounted Cash Flow (DCF) method, clearly showing (a) the present value of explicit period cash flows, (b) the present value of terminal value, and (c) the adjustment for the additional investment. Justify all discounting and risk adjustments. (10 Marks)
Q2. A listed company in the infrastructure sector has reported strong profits and positive cash flows. The board is divided on whether to distribute higher dividends to shareholders or retain the earnings to fund upcoming expansion projects. The CFO is tasked with presenting an analysis of the long-term financial implications of both options, considering the company’s growth strategy, liquidity needs, and the expectations of various stakeholders. Evaluate the strategic financial management decisions of a firm that must choose between paying dividends now or retaining earnings for future expansion. Critically assess the impact of each option on shareholder value, liquidity, and long-term profitability, and justify your recommendation. (10 Marks)
Q3 (A). A company is evaluating a strategic divestment of one of its business units. The unit’s projected free cash flows for the next 4 years are as follows (in Rs. lakhs):
| Year | Free Cash Flow (₹ Lakhs) |
| 1 | 60 |
| 2 | 70 |
| 3 | 80 |
| 4 | 90 |
After year 4, the unit is expected to grow at a constant rate of 5% per annum indefinitely. The company’s weighted average cost of capital (WACC) is 13%. Calculate the value of the business unit using the discounted cash flow (DCF) approach, including the terminal value, and interpret the strategic implications of your result for the divestment decision. (5 Marks)
Q3 (B). A company operating in a highly volatile industry finds that its traditional accounting system is inadequate for strategic decision-making. The management wants a new system that not only tracks past performance but also provides predictive insights, supports risk management, and enables timely strategic responses to market changes. Propose a strategic financial management system for a company seeking to improve its forecasting and adaptability in a volatile market. The company’s current accounting model is backward-looking and fails to provide actionable insights for future decision-making. How would you design a forward-looking system that integrates decision support, risk assessment, and performance monitoring? (5 Marks)
Dear students, get fully solved assignments by professionals
Do send your query at :
or call us at : 08263069601
(Plagiarism proofed assignments available with 100% surety and refund)