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    Mergers and Acquisitions End Term Examination

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    Haritha V H
    This document outlines an end term examination for a mergers and acquisitions course. It provides instructions for the exam, which consists of 6 questions related to a case study about Groupe Ariel SA's potential purchase of recycling equipment in Mexico. Students are asked to calculate and compare net present values using two different approaches, analyzing how the NPVs differ and which approach should be used. They are also asked to consider the impact on the NPV calculations of changes to inflation rate assumptions and expectations of peso depreciation. The final question asks if Groupe Ariel should approve the equipment purchase.

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    Mergers and Acquisitions End Term Examination

    Uploaded by

    Haritha V H
    53 views2 pages
    This document outlines an end term examination for a mergers and acquisitions course. It provides instructions for the exam, which consists of 6 questions related to a case study about Groupe Ariel SA's potential purchase of recycling equipment in Mexico. Students are asked to calculate and compare net present values using two different approaches, analyzing how the NPVs differ and which approach should be used. They are also asked to consider the impact on the NPV calculations of changes to inflation rate assumptions and expectations of peso depreciation. The final question asks if Groupe Ariel should approve the equipment purchase.

    Original Title

    MS20d014 (1)

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    This document outlines an end term examination for a mergers and acquisitions course. It provides instructions for the exam, which consists of 6 questions related to a case study about Groupe Ariel SA's potential purchase of recycling equipment in Mexico. Students are asked to calculate and compare net present values using two different approaches, analyzing how the NPVs differ and which approach should be used. They are also asked to consider the impact on the NPV calculations of changes to inflation rate assumptions and expectations of peso depreciation. The final question asks if Groupe Ariel should approve the equipment purchase.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    53 views2 pages

    Mergers and Acquisitions End Term Examination

    Uploaded by

    Haritha V H
    This document outlines an end term examination for a mergers and acquisitions course. It provides instructions for the exam, which consists of 6 questions related to a case study about Groupe Ariel SA's potential purchase of recycling equipment in Mexico. Students are asked to calculate and compare net present values using two different approaches, analyzing how the NPVs differ and which approach should be used. They are also asked to consider the impact on the NPV calculations of changes to inflation rate assumptions and expectations of peso depreciation. The final question asks if Groupe Ariel should approve the equipment purchase.

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    © All Rights Reserved
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    Mergers and Acquisitions

    End Term Examination

    Name of the student: Haritha V H


    Roll No: ms20d014
    Total Marks:50 Deadline: September 26, 2021, 1800 hours
    Mode: Take home
    Mail id for sending the answer scrip: <arun4corpfin@gmail.com>

    a. All questions pertain to the case provided in the link accompanying the question
    paper. Link is provided in the mail.
    b. Answer all questions in the question booklet.
    c. Read the questions carefully before answering. Be precise and to the point.
    d. All questions are self-explanatory. Do not ask for any clarifications. Make
    reasonable & valid assumptions wherever necessary and state them
    clearly.
    e. Mail your answers before the deadline to the email id provided.
    f. Best of Luck !

    Groupe Ariel S A

    1. Compute the net present value of Ariel Mexico’s recycling equipment in pesos
    by discounting incremental peso cash flows at a peso discount rate. How
    should this NPV be translated into Euros? Assume expected future inflation for
    France is 3% per year.

    2. Compute the NPV in Euros by translating the project’s future peso cash flows
    into Euros at expected future spot exchange rates. Note that Ariel’s Euro hurdle
    rate for a project of this type was 8%. Again, assume that annual inflation rates
    are expected to be 7% in Mexico and 3% in France.

    3. Compare the two sets of calculations and the corresponding NPVs. How and
    why do they differ? Which approach should Arnaud Martin use?

    4. Suppose Mexican inflation is projected at 3% instead of 7% per year (assume


    French inflation remains at 3%). How does this affect the NPV calculations?

    5. Suppose Ariel expects a significant real depreciation of the peso against the
    Euro. How should Martin incorporate such an expectation into his NPV
    analysis? (For simplicity you may continue with the assumption that inflation is
    expected to be 3% in both countries). What is its effect on the concluded NPV
    under each of the approaches in questions 1 and 2?

    6. Should Groupe Ariel approve the equipment purchase?

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