Student reference number: Strategic financial management

Name of schedule:
Student reference number:
Title of assignment: Strategic Financial Management
Actual number of words: 2718

Table of Contents
A) NPV Analysis of the investment proposal....................................................................3
B) Impact of the inflation.................................................................................................. 5
C) Risk in capital analysis and different approaches........................................................7
D) Concept of real Option................................................................................................ 9
E) Optimal Dividend Policy.............................................................................................12
Various theoretical arguments on optimal dividend policy..........................................13
Walter’s Model (Relevant Theory):..........................................................................13
Modigliani-Miller Model (Irrelevance theory):..........................................................13
Bird in Hand Argument (Dividend and Uncertainty):...............................................14
References.....................................................................................................................15

A) NPV ANALYSIS OF THE INVESTMENT PROPOSAL
Initial Investment
Table 1 Present Value of the investment
(Amount in €M)
Year Investment Tax Net Outflow PVF PV
0 20 4.2 15.8 1 15.8
1 10 2.1 7.9 0.909 7.1811
Total
outflow 22.9811
Annual cash flows
Table 2 Present Value of Annual cash flows
(Amount in €M)
Yea
r
Reve
nue
Ann
ual
labo
ur
cost
Varia
ble
input
cost
fix
ed
inp
ut
co
Re
nt
Net
inflo
w
Tax cash
flow
after
tax
PV
F
@
10
%
PV of
cash
flow
Lost
Contrib
ution
Net
Cash
Flow

st
0
4.
24
-
4.24 -4.24 1 -4.24 -4.24
1
28.78
4 3.5 5 2.5
4.
24
13.5
44
2.84
424
10.69
976
0.9
09
9.726
082 7.5
2.226
082
2 33.85 3.97 5.61
2.5
2
4.
24
17.5
1
3.67
71
13.83
29
0.8
26
11.42
598 7.5
3.925
975
3 39.81 4.49 6.29
2.5
4
4.
24
22.2
5
4.67
25
17.57
75
0.7
51
13.20
07
13.20
07
4 46.82 5.09 7.06
2.5
9
32.0
8
6.73
68
25.34
32
0.6
83
17.30
941
17.30
941
Tot
al
Cas
h
Infl
ow
32.42
217
Net Benefit From the investment
Table 3 Profit From the investment
Particulars Amount (€M)
Present Value of the Outflow 32.42