Strategic Corporate Finance — DU Bachelor of Business Administration (Financial Investment Analysis) Previous Year Question Papers

: .Strategic Coxporate Finance : BMS pup) Instructions to Candidates: If required, you can make assumptions. The following financial information is available for three companies for the year ended 31st March Particulars Company A (€Lakhs) Company 8 (€ Lalths) Company C (€ Lakhs) Tax Rate 20% 25% 22% Cost of Debt (after tax) 8% 10% 9% Cost of Equity 12% 14% 13% a) C.alculate Economic Value Added (EVA) for each company. b) Identify which company created the highest value for its shareholders. Case Study: Strategic Cost Management at AutoTech Ltd. AutoTech Ltd. is a global automobile parts manufacturer specializing in high-performance car batteries and electronic vehicle components. The company has a reputation for reliability and advanced technology. However, in recent years, it has faced: Rising production costs (raw material and labor costs increased by 18% in the past two years). Intense competition from low-cost manufacturers in emerging markets. Declining profit margins (profit margins fell from 28% to 14% in the last three years). AutoTech Ltd. currently follows a traditional costing system, allocating overhead based on machine hours. However, management believes this does not accurately reflect costs, especially for advanced battery systems requiring extensive R&D and premium raw materials. Current Costing & Pricing Data (Last Year): Product Line Units Selling Total Total Cost Profit Margin Sold Price (perunit) RevenueII Standard Battery 600,000 $120 $72M $60M 160/o Premium Battery 250,000 $250 $62.5M $57.5M 8%: EV Battery System 150,000 $500 $75M $67.5M loo/o , Strategic Cost Management plan: To optimize costs and improve profitability, the CFO, Mr. Rohan Patel, has identified following points for cost optimization: Competing battery manufacturers offer similar products at 15% lower prices. The target cost for the Standard Battery should be $110 instead of $115 to remain competitive. Advanced battery systems (EV Battery) consume 50% of R&D resources but account for only 30% of total sales. Implementing Activity-Based Costing (ABC) could help allocate overhead costs more accurately. Warranty claims for EV batteries cost an average of $15 per unit. Software updates and diagnostics cost $8 per unit annually, adding to post-sale expenses. Marketing expenses have increased by 35% in the past two years without a clear return on investment. The R&D budget increased by 30%, but only one major product innovation has been launched. Attempt the following questions: a) Suggest a cost reduction strategy that considers both production and post-sale costs. b) What are the challenges of shifting from a cost-plus pricing strategy to a market-driven pricing strategy? c) Suggest one innovative strategic cost management technique that AutoTech Ltd. can use to enhance profitability. Question No. 3 (6*3 Marks) The following financial data is provided for four companies: Company P, Company Q, Company R, and