MITU Ltd. wants to expand business outside India. For the project installation US funds $ 14.775 Million are required. Company wants to raise money…

CA Final · Advanced Financial Management · PYQS · January 2026
MITU Ltd. wants to expand business outside India. For the project installation US funds $ 14.775 Million are required. Company wants to raise money by issue of GDRs. Following information is available: (1) 7 shares shall underly each GDR. (2) GDR shall be priced at 7% discount to market price. (3) Market Price of share is 500 (Face Value - 100) per share. (4) Expected exchange rate is $1= 81.3750. (5) Dividend expected to be paid is 15% with growth rate 10%. (6) Flotation Cost of GDR is 1.5%. Required: Compute the number of GDRs to be issued and cost of the GDR to the company. (Note: Calculate in lacs with four decimals).

Suggested Answer and Working Notes:

(a) Net Issue Size = $14.775 million Gross Issue = $14.775 million / 0.985 = $15 million Issue Price per GDR in ₹ (500 x 7 x 93%) = 3255 Issue Price per GDR in $ (₹ 3255/81.3750) = $40 Dividend Per GDR (D 1 ) (15x 7) = 105 Net Proceeds Per GDR (3255x 0.985) = 3206.18 (a) Number of GDR to be issued = $15 million / $40 = 0.375 million/3.75 Lakhs /3,75,000 (b) Cost of GDR to X Ltd. k e = (105.00 / 3206.18) + 0.10 = 13.27%

Topics: International Financial Management

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