Student Name: Student ID Number: THE UNIVERSITY OF NEW SOUTH WALES JUNE / JULY 2006 FINS1613 Business Finance – Final Exam (1) TIME ALLOWED - 2 hours (2) TOTAL NUMBER OF QUESTIONS - 50 (3) ANSWER ALL QUESTIONS (4) ALL QUESTIONS ARE OF EQUAL VALUE. (5) THIS PAPER MAY NOT BE RETAINED BY CANDIDATE (6) CANDIDATES MAY BRING A PENCIL AND ERASER TO THE EXAMINATION. CANDIDATES MAY NOT BRING THEIR OWN CALCULATORS (7) THE FOLLOWING MATERIALS WILL BE PROVIDED
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Section A: Answer all questions. Total 42 points – each question in this section carries 3.5 points. Write the responses to ALL questions in your answer sheet. 1. A corporation has 2000 shares outstanding and 6 directors are up for election. The stock features cumulative voting. About how many shares do you have to own to guarantee electing at least yourself to one position on the board of directors (ignoring possible ties)? A) 1000. B) 333. C) 286. D) 1715. E) 343. 2. The
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after taxes‚ the purchase increases the annual expected earnings of the firm by: Earnings increase = $25‚000‚000(1 – .40) Earnings increase = $15‚000‚000 Since Stephenson is an all-equity firm‚ the appropriate discount rate is the firm’s unlevered cost of equity‚ so the NPV of the purchase is: NPV = –$100‚000‚000 + ($15‚000‚000 / .125) NPV = $20‚000‚000 b. After the announcement‚ the value of Stephenson will increase by $20 million‚ the net present value of the purchase. Under the efficient-market
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Chapter 16 Financial Distress‚ Managerial Incentives‚ and Information 16-1. Gladstone Corporation is about to launch a new product. Depending on the success of the new product‚ Gladstone may have one of four values next year: $150 million‚ $135 million‚ $95 million‚ and $80 million. These outcomes are all equally likely‚ and this risk is diversifiable. Gladstone will not make any payouts to investors during the year. Suppose the risk-free interest rate is 5% and assume perfect capital markets.
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with on conversations with practitioners at highly regarded on advice from best-selling textbooks and trade books. common theoretical frameworks to estimate the cost of variation‚ however‚ for the joint choices of the risk-free rate of return‚ beta and the equity market risk premium‚ as well of implementation.1 study. We revisit the issues and see what now constitutes best practice and what has changed in both academic recommendations and in practice. practice has changed some since
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Therefore‚ after taxes‚ the purchase increases the annual expected earnings of the firm by: Earnings increase = $23‚000‚000(1– .40) Earnings increase = $13‚800‚000 Since Stephenson is an all-equity firm‚ the appropriate discount rate is the firm’s unlevered cost of equity‚ so the NPV of the purchase is: NPV= – $95‚000‚000 + ($13‚800‚000 / .125)NPV = $15‚400‚000 b. Construct Stephenson’s market value balance sheet after it announces that the firm will finance the purchase using equity. What would
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INS Chapter 16 Additional Topics in International Capital Budgeting questions 1. Why should the required rate of return for a capital budgeting problem be project specific? Doesn’t the firm just have to satisfy an overall cost-of-capital requirement? Answer: The required rate of return for a capital budgeting problem is project specific because the firm is viewed as a portfolio of projects owned by the shareholders. It is the shareholder’s perspective that matters‚ and it is their
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2015SP1-FIN-65151X-01 / Accounting & Finance / Professor Francois Silatchom MODULE 3 POWERLINE NETWORK CORP. Operating Leverage‚ Financial Leverage‚ and the Optimal Capital Structure TEAM D1 Laura Hamin – lhny86@nycap.rr.com Raymond Negron – ffnegron@hotmail.com Eulises Roman – ermediaus@aol.com Myeshia Wagner – mrs.wagner1982@yahoo.com Table of Contents Executive Summary 3 Introduction 3 Analysis 4 Figure 1: Risk Comparison between Plans L and H 4 Figure 2: Operating probability
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A Note on Valuation Models: CCFs vs. APV vs WACC Fabrice Bienfait Table of Content Introduction..................................................................................................................................... 2 Enterprise Valuation ....................................................................................................................... 2 The Weighted Average Cost of Capital Approach ......................................................................... 2 The
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| | | | 49‚555 | 56‚005 | 61‚732 | 67‚956 | 74‚348 | 80‚911 | 82‚080 | 83‚255 | 84‚434 | 85‚617 | Income Tax @ | 40% | | | 19‚822 | 22‚402 | 24‚693 | 27‚182 | 29‚739 | 32‚365 | 32‚832 | 33‚302 | 33‚773 | 34‚247 | Unlevered Net Income | | | 29‚733 | 33‚603 | 37‚039 | 40‚773 | 44‚609
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