Tatal steel Acquires Corus.
Tata Steel, biggest steel producer in the Indian private sector has acuired Courus, (formely know as British steel) in a deal worth ₹8.6 billion. This makes Tata Steel the fifth largest steel producer in the world. A financial decision of this magnitude has singificant implicitness for both Tata steel ans Corus as will a s their emloyeees and Shareholders. To mention some of them:
Tta steel willl vecome the fith largest producer of steel in the world.
Tata steel will rasise a debt of over ₹8 billion to finance the transaction. The deal will be paid for by Tata steel UK. a Special pruose Vehicle (SPV) set -up for the pruose. This SPV will get funds from Tata Steel route though a singapore subsidiary. Another company of the Rata Graoup, Tata Sons Ltd., Will invest ₹1 billion dollars for perference shares alongwith Tata steel which will invest an equal amount.
Tata steel acquirer company , shall have to arrange about 36,500 crore of rupees to funance the take -over.
Tata - Steel will have to raise this amount through debt or equity or a combination of both. Some amount may come from internal accuals also. This financing decision will affect the capital structure of Tata Steel.
Tata Steel hpes to increase the production to 40 million tonnes and revenue to 32 billion US dollars by 2012.
It may affect the compectitiveness of Tata Steel because the cost of production of steel in all probability, will change.
The dividend paying capacity of Tata steel may be affected becasuse of this huge cash outflow and because of a singnificantly higher debt which would need to be seviced before paying any dividends to shareholders.
The degree of risk shall also be affacted. Needless to emphaise, decisions like this affect the future of the organisation. These decionss are almost irrevocable after they have been formalised.
Name the finacnial decision deiscussed in the above cose.

Explanation

Capital budgeting /Long-term investment decision.