MBA Level: Advanced Corporate Finance & Taxation (India)

Next chapter: Mergers & Acquisitions, Valuation (DCF, CAPM), MAT/AMT, Transfer Pricing, Financial Modeling, Working Capital, and Capstone Case Study. Fully interactive.

Cost of Capital (WACC) & Capital Structure

WACC Calculator with Tax Shield

Cost of Equity (Ke) % Cost of Debt (Kd) % Corporate Tax Rate (%) Equity Proportion (%) Debt Proportion (%)

WACC = 10.7% (After-tax)

Modigliani-Miller Proposition I (No Tax)

Firm Value (Unlevered) ₹ Lakhs Debt Added (₹ Lakhs)

Value levered = ₹5000 Lakhs (no tax, no bankruptcy costs)

📈 Dividend Policy – Walter Model & Gordon Growth

EPS (₹)

Cost of Equity (Ke) %

Return on Investment (r) %

If r > Ke, zero dividend policy maximizes value.

📊 Working Capital Management – Cash Conversion Cycle

Inventory Days

Receivables Days

Payables Days

Cash Conversion Cycle = 35 days

Minimum Alternate Tax (MAT) & Alternate Minimum Tax (AMT)

For companies, MAT u/s 115JB: 15% of book profit + surcharge + cess. For individuals/LLP, AMT u/s 115JC.

MAT Computation (Indian Corporate)

Book Profit as per Companies Act (₹ Lakhs) Normal Tax Liability (₹ Lakhs)

MAT = 150 Lakhs (15% of Book Profit) | Tax payable = Higher of MAT or Normal Tax

Transfer Pricing – Arm's Length Range (India)

International Transaction Value (₹ Lakhs) Arm's Length Price (ALP) (₹ Lakhs)

Adjustment: ₹20 Lakhs addition to income | Penalty risk 1-2% of transaction.

🔁 Tax Treaties & Withholding Tax (India-USA, India-Singapore)

Royalty/FTS rates: 10-15% under DTAA. Place of effective management (POEM) rules.

Discounted Cash Flow (DCF) – Enterprise Value & Equity Value

CAPM: Cost of Equity

Risk-Free Rate (%) Market Risk Premium (%) Beta (Levered)

Cost of Equity = 14.9%

DCF Valuation (5-year Forecast)

Year 1 FCF (₹ Lakhs) Growth Rate (years 1-5) % Terminal Growth Rate % WACC (%)

Enterprise Value = ₹ ... Lakhs

📊 Relative Valuation: EV/EBITDA, P/E, P/B Ratio Analysis

EBITDA (₹ Lakhs)

Industry EV/EBITDA multiple

Net Debt (₹ Lakhs)

Equity Value = ₹1,700 Lakhs

Scenario Analysis & Monte Carlo Simulator (Sensitivity)

NPV Sensitivity (Base Case)

Initial Investment (₹ Lakhs) Annual Cash Flow (₹ Lakhs) Project Life (Years) Discount Rate (%)

NPV = ₹ -? Lakhs, IRR = ?%

Break-even Analysis (Financial)

Fixed Costs (₹ Lakhs) Variable Cost per unit (₹) Selling Price per unit (₹)

Break-even = 6,667 units

📈 Monte Carlo Simulation (Conceptual) – Sensitivity Table

Adjust growth and WACC to see impact on valuation.

Revenue Growth Sensitivity (%)8%

WACC Sensitivity (%)12%

Enterprise Value = ₹1,452 Lakhs (Base 8% growth, 12% WACC)

Mergers & Acquisitions: Synergy Valuation & Exchange Ratio

Merger Valuation (Cash & Stock)

Acquirer Pre-merger Value (₹ Lakhs) Target Pre-merger Value (₹ Lakhs) Synergy (₹ Lakhs) Offer Premium (%)

Combined Value = ₹1,550 Lakhs | Gain to Target = ₹100 Lakhs

Accretion/Dilution Analysis (EPS)

Acquirer EPS (₹) Target EPS (₹) Exchange Ratio (shares)

Pro-forma EPS = ? | Accretive if > 12

🎓 Capstone Case Study: "Aditya Birla Finance Ltd" – Acquisition of "XYZ Capital"

Given financials: ABFL revenue ₹2,500 Cr, EBITDA ₹800 Cr, Net Debt ₹1,200 Cr. Target XYZ: revenue ₹600 Cr, EBITDA ₹180 Cr. Expected synergies ₹100 Cr. Industry EV/EBITDA multiple 9x. Compute deal value.

📊 Post-Merger Integration & Tax Implications (India)

Section 72A: Carry forward of losses for amalgamation. Stamp duty on merger (1-5% based on state).