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This document contains a strategic corporate finance assignment submitted by Sonam Bengani Jain for class FF7 at IIPM. It includes calculations of beta, cost of debt, weighted average cost of capital, economic value added, operating leverage, financial leverage, and various financial ratios for Sonam Software for 2010-2011 and 2009-2010 such as earnings per share, price to earnings ratio, dividend per share, debt to equity ratio, interest coverage ratio, and price to book value. It also compares the dividend returns paid by Sonam Software over 5 years to its competitors.

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. STRATEGIC CORPORATE FINANCE ASSIGNMENT NAME- SONAM BENGANI JAIN CLASS- FF7, IIPM ROLL NO.- 78 Prof. Sanjay Samtani .
1. Covariance= 567.1916/24 = 23.63 Variance= 854.2282/24 = 35.60 Beta= 23.63 /35.60 = 0.66 2. Cost of debt Kd= Amount of interest x 100 ( 1- tax) Amount of debt = (10.97 + 9.27) x 100 (114.63 + 78.62) = 10.47 % Cost of Equity Ke = Rf + 硫 (Rm- Rf ) Rm = CAGR (March 30,1997 to March 30, 2012) Ke= 8.3 + 0.66 (11.4-8.3) = 10.34 % WACC Equity + Debt = 6.75+ 114.63 = 121.38 WACC = Equity x Ke + Debt x Kd (Equity+ Debt) (Equity+ Debt) = 6.75 x 10.34 + 114.63 x 10.47 (114.63 + 6.75) (114.63 + 6.75) = 10.46 % 6. EVA = NOPAT-(CAPITAL EMPLOYED *WACC) 2010-11 NOPAT = PAT + Non- recurring exp + Revenue exp on R&D + Int Exp Non recurring income NOPAT = 9.80 +10.97 INT.+11.94 DEP = Rs 32.71 cr CAPITAL EMPLOYED = Fixed Assets + Investment + working Capital = 84.92 + 0.77 + (88.05 28.32) = Rs 145.42 cr WACC = 10.46 % EVA = 32.71 ( 145.42 * .1046) = 17.50
7. Operating Leverage = % change in EBIT % change in Sales = (38.37 26.02 ) (123.99-98.58) = 12.35 25.41 = 0.486 Financial Leverage = % change in EPS % change in EBIT EPS = PAT . No. of O/s shares DFL = 14.52 14.05 38.37 26.02 = 3.80 8. i) EPS 2010-11= (PAT- PREF. DEVIDEND)/ NO. OF SHARE (In crores) (9.80- 0.) /0.675 = 14.52 2009-2010 = (9.49- 0 )/ 0.675 = 14.05 ii) P/E RATIO = Market Value per Share Earnings per Share (EPS) CLOSING PRICE ON 23 May 2012 = 35.05 2010-2011= 35.05 / 14.52 = 2.41 2009-2010 = 35.05 / 14.05 = 2.49 iii) DPS D - Sum of dividends over a period (usually 1 year) SD - Special, one time dividends S - Shares outstanding for the period
2010-11= 1.57/ .675 = 2.32 2009-10 = 1.42 / .675= 2.10 iv) D/E RAIO 2011-10 = 114.63 / 43.38 = 2.64 2010-09 = 78.62 / 35.14 = 2.24 V ) INTEREST COVERAGE RATIO : = EBIT/ INTEREST 2011-2010 = 38.37 / 10.97 = 3.49 2010-2009 = 26.02 / 9.27 = 2.80 Vi) PRICE TO BOOK VALUE 2011-10 = 35.05 / 64.27= 0.55 2010-09 = 35.05 / 52.06 = 0.67 Vii ) PRICE TO EBIT 2011-10 = 35.05 / 38.37 = 0.91 2010-09 = 35.05 / 26.02 = 1.34 5. Sonata Software is paying very high returns to its equity shareholders. Year return 2011 200% 2010 170% 2009 150% 2008 110% 2007 110% Sonatas competitors are Phoenix mills, Jindal Cotex, SIL Invest. Comparatively Sonata has been paying good and sufficient dividend over the 5 years.
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  • 1. . STRATEGIC CORPORATE FINANCE ASSIGNMENT NAME- SONAM BENGANI JAIN CLASS- FF7, IIPM ROLL NO.- 78 Prof. Sanjay Samtani .
  • 2. 1. Covariance= 567.1916/24 = 23.63 Variance= 854.2282/24 = 35.60 Beta= 23.63 /35.60 = 0.66 2. Cost of debt Kd= Amount of interest x 100 ( 1- tax) Amount of debt = (10.97 + 9.27) x 100 (114.63 + 78.62) = 10.47 % Cost of Equity Ke = Rf + 硫 (Rm- Rf ) Rm = CAGR (March 30,1997 to March 30, 2012) Ke= 8.3 + 0.66 (11.4-8.3) = 10.34 % WACC Equity + Debt = 6.75+ 114.63 = 121.38 WACC = Equity x Ke + Debt x Kd (Equity+ Debt) (Equity+ Debt) = 6.75 x 10.34 + 114.63 x 10.47 (114.63 + 6.75) (114.63 + 6.75) = 10.46 % 6. EVA = NOPAT-(CAPITAL EMPLOYED *WACC) 2010-11 NOPAT = PAT + Non- recurring exp + Revenue exp on R&D + Int Exp Non recurring income NOPAT = 9.80 +10.97 INT.+11.94 DEP = Rs 32.71 cr CAPITAL EMPLOYED = Fixed Assets + Investment + working Capital = 84.92 + 0.77 + (88.05 28.32) = Rs 145.42 cr WACC = 10.46 % EVA = 32.71 ( 145.42 * .1046) = 17.50
  • 3. 7. Operating Leverage = % change in EBIT % change in Sales = (38.37 26.02 ) (123.99-98.58) = 12.35 25.41 = 0.486 Financial Leverage = % change in EPS % change in EBIT EPS = PAT . No. of O/s shares DFL = 14.52 14.05 38.37 26.02 = 3.80 8. i) EPS 2010-11= (PAT- PREF. DEVIDEND)/ NO. OF SHARE (In crores) (9.80- 0.) /0.675 = 14.52 2009-2010 = (9.49- 0 )/ 0.675 = 14.05 ii) P/E RATIO = Market Value per Share Earnings per Share (EPS) CLOSING PRICE ON 23 May 2012 = 35.05 2010-2011= 35.05 / 14.52 = 2.41 2009-2010 = 35.05 / 14.05 = 2.49 iii) DPS D - Sum of dividends over a period (usually 1 year) SD - Special, one time dividends S - Shares outstanding for the period
  • 4. 2010-11= 1.57/ .675 = 2.32 2009-10 = 1.42 / .675= 2.10 iv) D/E RAIO 2011-10 = 114.63 / 43.38 = 2.64 2010-09 = 78.62 / 35.14 = 2.24 V ) INTEREST COVERAGE RATIO : = EBIT/ INTEREST 2011-2010 = 38.37 / 10.97 = 3.49 2010-2009 = 26.02 / 9.27 = 2.80 Vi) PRICE TO BOOK VALUE 2011-10 = 35.05 / 64.27= 0.55 2010-09 = 35.05 / 52.06 = 0.67 Vii ) PRICE TO EBIT 2011-10 = 35.05 / 38.37 = 0.91 2010-09 = 35.05 / 26.02 = 1.34 5. Sonata Software is paying very high returns to its equity shareholders. Year return 2011 200% 2010 170% 2009 150% 2008 110% 2007 110% Sonatas competitors are Phoenix mills, Jindal Cotex, SIL Invest. Comparatively Sonata has been paying good and sufficient dividend over the 5 years.