Corporate Finance
The University for business and the professions
MSc Degree in Shipping, Trade and Finance
MSc Degree in Supply Chain, Trade and Finance
MSc Degree in Energy, Trade and Finance
Cass Business School
Module Code
SMM586
Exam title
Corporate Finance
Full/Part time
Date
1st May 2013
Time
10.00 -13.00
Division of Marks:
Section A carries 36 marks, Section B carries 28 marks and Section C carries 36 marks.
Instructions to students:
Students should answer TWO questions from
Section A, ONE question from Section B, and ONE questions from Section C
This paper contains SIX questions and comprises SIX pages including the title page
Number of answer books to be provided: One
Calculators are permitted: YES: CASIO FX-83 GT+,
CASIO FX-85 GT+ , CASIO FX-83 MS,
CASIO FX-83 ES, CASIO FX-85 MS, AND CASIO FX-85 ES
Dictionaries are NOT permitted
Additional materials or tables to be provided: None
Exam paper can be removed from the exam room: No
Internal Examiner: Dr Giovanni Cespa
External Examiner: Dr Dong-Wook Song
Section A
Answer TWO of the following questions (20 lines maximum each):
Question 1
Hotel Inc. is a diversified company whose core business is in the “Lodging” industry, which has an estimated industry asset beta of 0.53. Hotel Inc. also holds a division operating in the “Contract Services” industry, providing food to health-care and educational institutions.
The divisional manager is pressing for an expansion of the Contract Services division through new investments, and claims that the WACC to be used in the valuation of these investments must be computed based on an industry asset beta of 0.53. You must advise the CFO of Hotel
Inc. on whether the divisional manager’s proposal is sound. After unlevering equity betas in the “Contract Services” industry, you find that the industry asset beta is 1.03. What is your advice to Hotel Inc.’s CFO? Should he follow the proposal of the Contract Services divisional
MSc Degree in Shipping, Trade and Finance
MSc Degree in Supply Chain, Trade and Finance
MSc Degree in Energy, Trade and Finance
Cass Business School
Module Code
SMM586
Exam title
Corporate Finance
Full/Part time
Date
1st May 2013
Time
10.00 -13.00
Division of Marks:
Section A carries 36 marks, Section B carries 28 marks and Section C carries 36 marks.
Instructions to students:
Students should answer TWO questions from
Section A, ONE question from Section B, and ONE questions from Section C
This paper contains SIX questions and comprises SIX pages including the title page
Number of answer books to be provided: One
Calculators are permitted: YES: CASIO FX-83 GT+,
CASIO FX-85 GT+ , CASIO FX-83 MS,
CASIO FX-83 ES, CASIO FX-85 MS, AND CASIO FX-85 ES
Dictionaries are NOT permitted
Additional materials or tables to be provided: None
Exam paper can be removed from the exam room: No
Internal Examiner: Dr Giovanni Cespa
External Examiner: Dr Dong-Wook Song
Section A
Answer TWO of the following questions (20 lines maximum each):
Question 1
Hotel Inc. is a diversified company whose core business is in the “Lodging” industry, which has an estimated industry asset beta of 0.53. Hotel Inc. also holds a division operating in the “Contract Services” industry, providing food to health-care and educational institutions.
The divisional manager is pressing for an expansion of the Contract Services division through new investments, and claims that the WACC to be used in the valuation of these investments must be computed based on an industry asset beta of 0.53. You must advise the CFO of Hotel
Inc. on whether the divisional manager’s proposal is sound. After unlevering equity betas in the “Contract Services” industry, you find that the industry asset beta is 1.03. What is your advice to Hotel Inc.’s CFO? Should he follow the proposal of the Contract Services divisional