Q No 2: As an analyst in the valuation team your job is to perform significant financial modeling and analysis. Your company is seeing a new sales strategy that require your input. The strategy will be effective for the upcoming 4 Years. If the company adopts the new strategy, sales will grow at the rate of 15% per year for three years. Other ratios such as: Asset turnover, gross margin, the capital structure and income tax will remain unchanged. However, depreciation would be applicable at 8% of net fixed assets at the starting of the year. Moreover, the target rate of return for the company is 12%. Additional financial information for current year is mentioned below:   Income Statement Sales 50,000 Gross Margin (15%) 7,500 Admin., selling and Distribution expenses (7%) 3,500 Profit before tax 10,000 Tax (35%) 3,500 Profit After Taxes 6,500 Balance Sheet Fixed Assets 17,000 Current Assets 12,000 Equity 25,000    Determine value of business before adoption of new strategy?  What will be the incremental value and value of business after adoption of this new strategy?  Provide detailed comments should the company proceeds with this new strategy or Not?

Q: Provide detailed comments should the company proceeds with this new strategy or Not?

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.