The Open Polytechnic of New Zealand Trimester 1‚ 2012 71303 Corporate Finance Final Examination Time allowed Three hours‚ plus 10 minutes to read this paper. Instructions 1. 2. 3. 4. Answer all questions. Read each question carefully. Start each question on a new page. Show all of your workings. Mark allocation Question Part A Part B 1. 2. 3. 4. 5. Cost of capital Risk and return Investment timing real option Capital structure Dividend policy 14 12 15 20 15 Total 100 Topic Multiple-choice
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of debt of the company. Therefore‚ there must be a level of debt that make the benefits of debt and potential danger of debt offset each other. In another word‚ the marginal revenue of debt equals the marginal cost of debt. But remember‚ the real cases are not as easy as we put here. When a firm procures funds from investors or owners‚ there will be an explicit or implicit promise to pay return to them. The return is paid in terms of interest which is compulsory paid to all investors and owners
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Practice Problem Set – 1 ( The following problems are from Corporate Finance by Ross‚ Westerfield‚ and Jaffe – Tenth edition‚ McGraw-Hill / Irwin – ISBN 978-0-07-803477-0 ) 1. Audrey Sanborn has just arranged to purchase a $ 550‚000 vacation home in the Bahamas with a 20 percent down payment. The mortgage has a 6.1 percent stated annual interest rate‚ compounded monthly‚ and calls for equal monthly payments over the next 30 years. Her first payment will be due one month from now. However‚ the mortgage
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value of the firm without leverage? b. Suppose you borrow $1 million. According to MM‚ what fraction of the firm’s equity will you need to sell to raise the additional $1 million you need? c. What is the value of your share of the firm’s equity in cases (a) and (b)? a. b. c. Total value of equity = 2 × $2m = $4m MM says total value of firm is still $4 million. $1 million of debt implies total value of equity is $3 million.
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Assignment on An Appraisal on Dividend Policy and Capital Structure of Fu-Wang Ceramic Industry Ltd. Corporate Finance (FIN-507) Sec-01 Prepared For: Dr. Tanvir Ahmed Chowdhury Department of Business Administration East West University Prepared By: Md. Iftekharul Haque ID: 2009-3-95-052 Shazzad Hossain ID: 2010-2-95-155 Md. Yahyea ID: 2009-1-95-040 Rakesh Mondal ID: 2010-1-95-025 Hasanuzzaman Chowdhuri ID:2009-1-95-095 Submission Date: March 30
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B6301: Corporate Finance Clarkson Lumber C C Co. Valuation Clarkson Valuation Navin Chopra 1 Clarkson‚ 1996 • At the beginning of 1996‚ company is entirely owned by Mr. Clarkson • Following tight funding during a period of good business performance‚ the company has obtained debt funding to payoff the trade credit‚ NP trade • While financials for the first quarter of 1996 are available‚ we will value the company as at the beginning of 1996/end of 1995 Clarkson Valuation
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Solutions Manual Fundamentals of Corporate Finance 9th edition Ross‚ Westerfield‚ and Jordan Updated 12-20-2008 CHAPTER 1 INTRODUCTION TO CORPORATE FINANCE Answers to Concepts Review and Critical Thinking Questions 1. Capital budgeting (deciding whether to expand a manufacturing plant)‚ capital structure (deciding whether to issue new equity and use the proceeds to retire outstanding debt)‚ and working capital management (modifying the firm’s credit collection policy with its customers). Disadvantages:
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depending on whether the discount rate is less than‚ equal to‚ or greater than the IRR. The discounted payback includes the effect of the relevant discount rate. If a project’s discounted payback period is less than the project’s life‚ it must be the case that NPV is positive. Assuming conventional cash flows‚ if a project has a positive NPV for a certain discount rate‚ then it will also have a positive NPV for a zero discount rate; thus‚ the payback period must be less than the project life. Since
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Calculation Present value (PV) =? Future value (FV) = (90‚000*15) = $1‚350‚000 Periodic payment amount (PMT) =? Interest rate per period (Rate) = 8% or 0.08 Number of payment periods (Nper) = 30 Using the Excel function “PV”‚ the following data is entered into the presented fields Rate = 8% Nper = 30 PMT =? Fv = 1‚350‚000 Type = blank PMT = $9‚416.15 $9‚416.15 is the amount required for 30 annual deposits with an 8% compound interest to yield $90‚000 for 15 years. 2. If a lump
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reinvesting the second year dividends for the final year. Mean = Ṝ = (R1 + … + RT) / T Risk premium = Difference between risky returns and Riskfree return Real return = Ṝ minus inflation Return = mean Risk = standard deviation Chapter 13: Corporate Financing Decisions and Efficient Markets There are three ways to create valuable financing opportunities: 1. Investors lack an understanding of the risk an d valuation of complex securities. But as investors are not that easy to fool‚ the complex
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