1. Assess the financial performance of Apollo Tyres in recent years, using the financial statements provided, and whether it appears a likely candidate for Santanu’s investment portfolio. 15 marks
2. Calculate the Weighted Average Cost of capital for Apollo Tyres.
10 marks
3. Create a Free Cash Flow valuation model to calculate a fair value for Apollo Tyres Ltd’s share price at 31st March 2012 20 marks
4. Highlight the key sensitivities in your model that affect your calculation of the share price. 10 marks
5. Santanu believes that Apollo Tyres may decide to issue 25 million new shares at the current share price of 79.35 and use the proceeds to reduce its debt; this should raise its credit rating from AA to AAA. Recalculate the impact on your fair value share price in Q3. 15 marks
6. Santanu is concerned that the value of Apollo Tyres may be adversely affected by its rapidly increasing amount of debt. Explain using a range of capital structure theories whether the value of the equity in the company can be affected by how it is financed.
15 marks
7. Santanu has also asked you to investigate Apollo Tyres dividend decision. Explain using a range of dividend theories the factors that a company take into account when deciding on

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