{"id":20538,"date":"2021-03-17T03:18:46","date_gmt":"2021-03-17T03:18:46","guid":{"rendered":"https:\/\/www.dumpsbase.com\/freedumps\/?p=20538"},"modified":"2021-03-17T03:18:49","modified_gmt":"2021-03-17T03:18:49","slug":"f3-financial-strategy-online-cimapra19-f03-1-eng-real-dumps","status":"publish","type":"post","link":"https:\/\/www.dumpsbase.com\/freedumps\/f3-financial-strategy-online-cimapra19-f03-1-eng-real-dumps.html","title":{"rendered":"F3 Financial Strategy (Online) CIMAPRA19-F03-1-ENG Real Dumps"},"content":{"rendered":"\n<p>Take CIMAPRA19-F03-1-ENG F3 Financial Strategy (Online) exam to complete your <span class=\"current\">Professional Qualification<\/span>. Based on the CIMAPRA19-F03-1-ENG exam topics, we have released new CIMAPRA19-F03-1-ENG dumps questions. There are 222 practice exam questions and answers online, which help you prepare for F3 Financial Strategy (Online) exam well. Also, we have CIMAPRA19-F03-1-ENG free dumps online for checking the quality of\u00a0F3 Financial Strategy (Online) CIMAPRA19-F03-1-ENG dumps.<\/p>\n<h1>Read <span style=\"color: #993300;\">CIMAPRA19-F03-1-ENG Free Dumps<\/span> Online First<\/h1>\n<script>\n\t  window.fbAsyncInit = function() {\n\t    FB.init({\n\t      appId            : '622169541470367',\n\t      autoLogAppEvents : true,\n\t      xfbml            : true,\n\t      version          : 'v3.1'\n\t    });\n\t  };\n\t\n\t  (function(d, s, id){\n\t     var js, fjs = d.getElementsByTagName(s)[0];\n\t     if (d.getElementById(id)) {return;}\n\t     js = d.createElement(s); js.id = id;\n\t     js.src = \"https:\/\/connect.facebook.net\/en_US\/sdk.js\";\n\t     fjs.parentNode.insertBefore(js, fjs);\n\t   }(document, 'script', 'facebook-jssdk'));\n\t<\/script><script type=\"text\/javascript\" >\ndocument.addEventListener(\"DOMContentLoaded\", function(event) { \nif(!window.jQuery) alert(\"The important jQuery library is not properly loaded in your site. Your WordPress theme is probably missing the essential wp_head() call. You can switch to another theme and you will see that the plugin works fine and this notice disappears. If you are still not sure what to do you can contact us for help.\");\n});\n<\/script>  \n  \n<div  id=\"watupro_quiz\" class=\"quiz-area single-page-quiz\">\n<p id=\"submittingExam5231\" style=\"display:none;text-align:center;\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.dumpsbase.com\/freedumps\/wp-content\/plugins\/watupro\/img\/loading.gif\" width=\"16\" height=\"16\"><\/p>\n\n<div class=\"watupro-exam-description\" id=\"description-quiz-5231\"><\/div>\n\n<form action=\"\" method=\"post\" class=\"quiz-form\" id=\"quiz-5231\"  enctype=\"multipart\/form-data\" >\n<div class='watu-question ' id='question-1' style=';'><div id='questionWrap-1'  class='   watupro-question-id-171226'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>1. <\/span>CORRECT TEXT <br \/>\r<br>A venture capitalist invests in a company by means of buying: <br \/>\r<br>&#8226; 9 million shares for $2 a share and <br \/>\r<br>&#8226; 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time. <br \/>\r<br>The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment. <br \/>\r<br>The company has 10 million shares in issue. <br \/>\r<br>What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return? <br \/>\r<br>Give your answer to the nearest $ million. <br \/>\r<br>$ million.<\/div><input type='hidden' name='question_id[]' id='qID_1' value='171226' \/><input type='hidden' id='answerType171226' value='textarea'><!-- end question-content--><\/div><div class='question-choices '><p><textarea name='answer-171226[]' id='textarea_q_171226' class='watupro-textarea-medium' rows='5' cols='80'><\/textarea>\n<\/p><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-2' style=';'><div id='questionWrap-2'  class='   watupro-question-id-171227'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>2. <\/span>CORRECT TEXT <br \/>\r<br>A listed company is planning to raise $21.6 million to finance a new project with a positive net present value of $5 million. The finance is to be raised via a rights issue at a 10% discount to the current share price. There are currently 100 million shares in issue, trading at $2.00 each. <br \/>\r<br>Taking the new project into account, what would the theoretical ex-rights price be? <br \/>\r<br>Give your answer to two decimal places. <br \/>\r<br>$ ?<\/div><input type='hidden' name='question_id[]' id='qID_2' value='171227' \/><input type='hidden' id='answerType171227' value='textarea'><!-- end question-content--><\/div><div class='question-choices '><p><textarea name='answer-171227[]' id='textarea_q_171227' class='watupro-textarea-medium' rows='5' cols='80'><\/textarea>\n<\/p><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-3' style=';'><div id='questionWrap-3'  class='   watupro-question-id-171228'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>3. <\/span>Which THREE of the following are likely to be strategic reasons for a horizontal acquisition?<\/div><input type='hidden' name='question_id[]' id='qID_3' value='171228' \/><input type='hidden' id='answerType171228' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171228[]' id='answer-id-692477' class='answer   answerof-171228 ' value='692477'   \/><label for='answer-id-692477' id='answer-label-692477' class=' answer'><span>Reduction of risk by building a larger portfolio<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171228[]' id='answer-id-692478' class='answer   answerof-171228 ' value='692478'   \/><label for='answer-id-692478' id='answer-label-692478' class=' answer'><span>Acquisition of an undervalued company<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171228[]' id='answer-id-692479' class='answer   answerof-171228 ' value='692479'   \/><label for='answer-id-692479' id='answer-label-692479' class=' answer'><span>To achieve economies of scale<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171228[]' id='answer-id-692480' class='answer   answerof-171228 ' value='692480'   \/><label for='answer-id-692480' id='answer-label-692480' class=' answer'><span>To secure key parts of the value chain<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171228[]' id='answer-id-692481' class='answer   answerof-171228 ' value='692481'   \/><label for='answer-id-692481' id='answer-label-692481' class=' answer'><span>Reduction of competition<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-4' style=';'><div id='questionWrap-4'  class='   watupro-question-id-171229'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>4. <\/span>A company plans to raise $12 million to finance an expansion project using a rights issue. <br \/>\r<br>Relevant data: <br \/>\r<br>&#8226; Shares will be offered at a 20% discount to the present market price of $15.00 per share. <br \/>\r<br>&#8226; There are currently 2 million shares in issue. <br \/>\r<br>&#8226; The project is forecast to yield a positive NPV of $6 million. <br \/>\r<br>What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?<\/div><input type='hidden' name='question_id[]' id='qID_4' value='171229' \/><input type='hidden' id='answerType171229' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171229[]' id='answer-id-692482' class='answer   answerof-171229 ' value='692482'   \/><label for='answer-id-692482' id='answer-label-692482' class=' answer'><span>$16.00<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171229[]' id='answer-id-692483' class='answer   answerof-171229 ' value='692483'   \/><label for='answer-id-692483' id='answer-label-692483' class=' answer'><span>$14.00<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171229[]' id='answer-id-692484' class='answer   answerof-171229 ' value='692484'   \/><label for='answer-id-692484' id='answer-label-692484' class=' answer'><span>$9.00<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171229[]' id='answer-id-692485' class='answer   answerof-171229 ' value='692485'   \/><label for='answer-id-692485' id='answer-label-692485' class=' answer'><span>$11.00<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-5' style=';'><div id='questionWrap-5'  class='   watupro-question-id-171230'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>5. <\/span>Company T is a listed company in the retail sector. <br \/>\r<br>Its current profit before interest and taxation is $5 million. <br \/>\r<br>This level of profit is forecast to be maintainable in future. <br \/>\r<br>Company T has a 10% corporate bond in issue with a nominal value of $10 million. <br \/>\r<br>This currently trades at 90% of its nominal value. <br \/>\r<br>Corporate tax is paid at 20%. <br \/>\r<br>The following information is available: <br \/>\r<br>Which of the following is a reasonable expectation of the equity value in the event of an attempted takeover?<\/div><input type='hidden' name='question_id[]' id='qID_5' value='171230' \/><input type='hidden' id='answerType171230' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171230[]' id='answer-id-692486' class='answer   answerof-171230 ' value='692486'   \/><label for='answer-id-692486' id='answer-label-692486' class=' answer'><span>$32.0 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171230[]' id='answer-id-692487' class='answer   answerof-171230 ' value='692487'   \/><label for='answer-id-692487' id='answer-label-692487' class=' answer'><span>$41.6 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171230[]' id='answer-id-692488' class='answer   answerof-171230 ' value='692488'   \/><label for='answer-id-692488' id='answer-label-692488' class=' answer'><span>$65.0 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171230[]' id='answer-id-692489' class='answer   answerof-171230 ' value='692489'   \/><label for='answer-id-692489' id='answer-label-692489' class=' answer'><span>$50.2 million<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-6' style=';'><div id='questionWrap-6'  class='   watupro-question-id-171231'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>6. <\/span>A private company manufactures goods for export, the goods are priced in foreign currency B$. <br \/>\r<br>The company is partly owned by members of the founding family and partly by a venture capitalist who is helping to grow the business rapidly in preparation for a planned listing in three years' time. <br \/>\r<br>The company therefore has significant long term exposure to the B$. <br \/>\r<br>This exposure is hedged up to 24 months into the future based on highly probable forecast future revenue streams. <br \/>\r<br>The company does not apply hedge accounting and this has led to high volatility in <br \/>\r<br>reported earnings. <br \/>\r<br>Which of the following best explains why external consultants have recently advised the company to apply hedge accounting?<\/div><input type='hidden' name='question_id[]' id='qID_6' value='171231' \/><input type='hidden' id='answerType171231' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171231[]' id='answer-id-692490' class='answer   answerof-171231 ' value='692490'   \/><label for='answer-id-692490' id='answer-label-692490' class=' answer'><span>To provide a more appropriate earnings figure for use in calculating the annual dividend.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171231[]' id='answer-id-692491' class='answer   answerof-171231 ' value='692491'   \/><label for='answer-id-692491' id='answer-label-692491' class=' answer'><span>To make it easier for the market to value the business when it is listed on the Stock Exchange.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171231[]' id='answer-id-692492' class='answer   answerof-171231 ' value='692492'   \/><label for='answer-id-692492' id='answer-label-692492' class=' answer'><span>To ensure that the venture capitalist receives regular annual returns on its investment.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171231[]' id='answer-id-692493' class='answer   answerof-171231 ' value='692493'   \/><label for='answer-id-692493' id='answer-label-692493' class=' answer'><span>To fully adopt IFRS in preparation for listing the company.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-7' style=';'><div id='questionWrap-7'  class='   watupro-question-id-171232'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>7. <\/span>Which of the following statements best describes a residual dividend policy?<\/div><input type='hidden' name='question_id[]' id='qID_7' value='171232' \/><input type='hidden' id='answerType171232' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171232[]' id='answer-id-692494' class='answer   answerof-171232 ' value='692494'   \/><label for='answer-id-692494' id='answer-label-692494' class=' answer'><span>Dividends are paid only after the on-going operational needs of the business have been met.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171232[]' id='answer-id-692495' class='answer   answerof-171232 ' value='692495'   \/><label for='answer-id-692495' id='answer-label-692495' class=' answer'><span>Dividends are paid only if no further positive NPV projects are available.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171232[]' id='answer-id-692496' class='answer   answerof-171232 ' value='692496'   \/><label for='answer-id-692496' id='answer-label-692496' class=' answer'><span>All surplus earnings are invested back into the business.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171232[]' id='answer-id-692497' class='answer   answerof-171232 ' value='692497'   \/><label for='answer-id-692497' id='answer-label-692497' class=' answer'><span>Dividends are paid at a constant rate.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-8' style=';'><div id='questionWrap-8'  class='   watupro-question-id-171233'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>8. <\/span>The Board of Directors of a small listed company engaged in exploration are currently considering the future dividend policy of the company. Exploration is considered a high-risk business and consequently the company has a low level of debt finance. <br \/>\r<br>Forecasts indicate a period of profit fluctuation in the next few years as the company is planning to embark on a major capital investment project. Debt finance is unlikely to be available due to the project's high business risk. <br \/>\r<br>Which THREE of the following are practical considerations when determining the company's dividend\/retention policy?<\/div><input type='hidden' name='question_id[]' id='qID_8' value='171233' \/><input type='hidden' id='answerType171233' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171233[]' id='answer-id-692498' class='answer   answerof-171233 ' value='692498'   \/><label for='answer-id-692498' id='answer-label-692498' class=' answer'><span>The timing and size of the cash flow requirements for the new investment.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171233[]' id='answer-id-692499' class='answer   answerof-171233 ' value='692499'   \/><label for='answer-id-692499' id='answer-label-692499' class=' answer'><span>The fluctuating nature of the projected future profits.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171233[]' id='answer-id-692500' class='answer   answerof-171233 ' value='692500'   \/><label for='answer-id-692500' id='answer-label-692500' class=' answer'><span>The legislation and regulation governing distributable profits.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171233[]' id='answer-id-692501' class='answer   answerof-171233 ' value='692501'   \/><label for='answer-id-692501' id='answer-label-692501' class=' answer'><span>The dividend policies of mature listed multinational companies in the exploration industry.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171233[]' id='answer-id-692502' class='answer   answerof-171233 ' value='692502'   \/><label for='answer-id-692502' id='answer-label-692502' class=' answer'><span>The general level of interest rates and the tax savings on interest costs relating to debt finance.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-9' style=';'><div id='questionWrap-9'  class='   watupro-question-id-171234'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>9. <\/span>Hospital X provides free healthcare to all members of the community, funded by the central Government. <br \/>\r<br>Hospital Y provides healthcare which has to be paid for by the individual patients. It is a listed company, owned by a large number of shareholders. <br \/>\r<br>In comparing the above two organisations and their objectives, which THREE of the following statements are correct?<\/div><input type='hidden' name='question_id[]' id='qID_9' value='171234' \/><input type='hidden' id='answerType171234' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171234[]' id='answer-id-692503' class='answer   answerof-171234 ' value='692503'   \/><label for='answer-id-692503' id='answer-label-692503' class=' answer'><span>X is a not-for-profit organisation while Y is a for-profit organisation.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171234[]' id='answer-id-692504' class='answer   answerof-171234 ' value='692504'   \/><label for='answer-id-692504' id='answer-label-692504' class=' answer'><span>X and Y have the same primary financial objective - to maximise shareholder wealth.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171234[]' id='answer-id-692505' class='answer   answerof-171234 ' value='692505'   \/><label for='answer-id-692505' id='answer-label-692505' class=' answer'><span>The performance of X will be appraised primarily on the basis of value for money.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171234[]' id='answer-id-692506' class='answer   answerof-171234 ' value='692506'   \/><label for='answer-id-692506' id='answer-label-692506' class=' answer'><span>Only Y is likely to have a mixture of financial and non-financial objectives.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171234[]' id='answer-id-692507' class='answer   answerof-171234 ' value='692507'   \/><label for='answer-id-692507' id='answer-label-692507' class=' answer'><span>X and Y will have the same primary non financial objective - provision of quality of health care.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-10' style=';'><div id='questionWrap-10'  class='   watupro-question-id-171235'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>10. <\/span>Company M's current profit before interest and taxation is $5.0 million. <br \/>\r<br>It has a long-term 10% corporate bond in issue with a nominal value of $10 million. <br \/>\r<br>The rate of corporate tax is 25%. <br \/>\r<br>It plans to continue to pay out 50% of its earnings in dividends and earnings are expected to grow by 3% each year in perpetuity. <br \/>\r<br>Its cost of equity is 10%. <br \/>\r<br>Using the dividend growth model, advise the Board of Directors of Company M which of the following provide a reasonable valuation of Company M's equity?<\/div><input type='hidden' name='question_id[]' id='qID_10' value='171235' \/><input type='hidden' id='answerType171235' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171235[]' id='answer-id-692508' class='answer   answerof-171235 ' value='692508'   \/><label for='answer-id-692508' id='answer-label-692508' class=' answer'><span>$73.6 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171235[]' id='answer-id-692509' class='answer   answerof-171235 ' value='692509'   \/><label for='answer-id-692509' id='answer-label-692509' class=' answer'><span>$22.1 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171235[]' id='answer-id-692510' class='answer   answerof-171235 ' value='692510'   \/><label for='answer-id-692510' id='answer-label-692510' class=' answer'><span>$44.1 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171235[]' id='answer-id-692511' class='answer   answerof-171235 ' value='692511'   \/><label for='answer-id-692511' id='answer-label-692511' class=' answer'><span>$50.1 million<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-11' style=';'><div id='questionWrap-11'  class='   watupro-question-id-171236'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>11. <\/span>Company C has received an unwelcome takeover bid from Company P. <br \/>\r<br>Company P is approximately twice the size of Company C based on market capitalisation. <br \/>\r<br>Although the two companies have some common business interests, the main aim of the bid is diversification for Company P. <br \/>\r<br>The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C. <br \/>\r<br>There is a cash alternative of $5.50 for each Company C share. <br \/>\r<br>Company C has substantial cash balances which the directors were planning to use to fund an acquisition. <br \/>\r<br>These plans have not been announced to the market. <br \/>\r<br>The following share price information is relevant. All prices are in $. <br \/>\r<br>Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?<\/div><input type='hidden' name='question_id[]' id='qID_11' value='171236' \/><input type='hidden' id='answerType171236' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171236[]' id='answer-id-692512' class='answer   answerof-171236 ' value='692512'   \/><label for='answer-id-692512' id='answer-label-692512' class=' answer'><span>Write to shareholders explaining fully why the company's share price is under valued.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171236[]' id='answer-id-692513' class='answer   answerof-171236 ' value='692513'   \/><label for='answer-id-692513' id='answer-label-692513' class=' answer'><span>Change the Articles of Association to increase the percentage of shareholder votes \r\nrequired to approve a takeover.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171236[]' id='answer-id-692514' class='answer   answerof-171236 ' value='692514'   \/><label for='answer-id-692514' id='answer-label-692514' class=' answer'><span>Pay a one-off special dividend.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171236[]' id='answer-id-692515' class='answer   answerof-171236 ' value='692515'   \/><label for='answer-id-692515' id='answer-label-692515' class=' answer'><span>Refer the bid to the country's competition authorities.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-12' style=';'><div id='questionWrap-12'  class='   watupro-question-id-171237'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>12. <\/span>Which of the following statements about IFRS 7 Financial Instruments: Disclosures is true?<\/div><input type='hidden' name='question_id[]' id='qID_12' value='171237' \/><input type='hidden' id='answerType171237' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171237[]' id='answer-id-692516' class='answer   answerof-171237 ' value='692516'   \/><label for='answer-id-692516' id='answer-label-692516' class=' answer'><span>IFRS 7 \r\nonly applies to entities that are designated as financial institutions by a regulatory authority.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171237[]' id='answer-id-692517' class='answer   answerof-171237 ' value='692517'   \/><label for='answer-id-692517' id='answer-label-692517' class=' answer'><span>IFRS 7 requires disclosures to be given for each separate class of financial instruments.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171237[]' id='answer-id-692518' class='answer   answerof-171237 ' value='692518'   \/><label for='answer-id-692518' id='answer-label-692518' class=' answer'><span>The main requirement of IFRS 7 is for qualitative disclosures relating to financial instruments and market risks.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171237[]' id='answer-id-692519' class='answer   answerof-171237 ' value='692519'   \/><label for='answer-id-692519' id='answer-label-692519' class=' answer'><span>IFRS 7 requires sensitivity analysis in relation to credit risk.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-13' style=';'><div id='questionWrap-13'  class='   watupro-question-id-171238'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>13. <\/span>A profit-seeking company intends to acquire another company for a variety of reasons, primarily to enhance shareholder wealth. <br \/>\r<br>Which THREE of the following offer the greatest potential for enhancing shareholder wealth?<\/div><input type='hidden' name='question_id[]' id='qID_13' value='171238' \/><input type='hidden' id='answerType171238' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171238[]' id='answer-id-692520' class='answer   answerof-171238 ' value='692520'   \/><label for='answer-id-692520' id='answer-label-692520' class=' answer'><span>Achieving more press coverage for the company.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171238[]' id='answer-id-692521' class='answer   answerof-171238 ' value='692521'   \/><label for='answer-id-692521' id='answer-label-692521' class=' answer'><span>Creating new opportunities for employees.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171238[]' id='answer-id-692522' class='answer   answerof-171238 ' value='692522'   \/><label for='answer-id-692522' id='answer-label-692522' class=' answer'><span>Achieving greater cultural diversity.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171238[]' id='answer-id-692523' class='answer   answerof-171238 ' value='692523'   \/><label for='answer-id-692523' id='answer-label-692523' class=' answer'><span>Acquiring Intellectual Property assets.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171238[]' id='answer-id-692524' class='answer   answerof-171238 ' value='692524'   \/><label for='answer-id-692524' id='answer-label-692524' class=' answer'><span>Exploiting production synergies.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171238[]' id='answer-id-692525' class='answer   answerof-171238 ' value='692525'   \/><label for='answer-id-692525' id='answer-label-692525' class=' answer'><span>Elimination of existing competition.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-14' style=';'><div id='questionWrap-14'  class='   watupro-question-id-171239'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>14. <\/span>A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount rate. <br \/>\r<br>Details of the two alternatives are as follows: <br \/>\r<br>Buy option: <br \/>\r<br>&#8226; To be financed by a bank loan <br \/>\r<br>&#8226; Tax depreciation allowances are available on a reducing-balance basis <br \/>\r<br>&#8226; Assets depreciated on a straight-line basis <br \/>\r<br>Lease option: <br \/>\r<br>&#8226; Finance lease <br \/>\r<br>&#8226; Maintenance to be paid by the lessee <br \/>\r<br>&#8226; Tax relief available on interest payments and book depreciation <br \/>\r<br>Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?<\/div><input type='hidden' name='question_id[]' id='qID_14' value='171239' \/><input type='hidden' id='answerType171239' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171239[]' id='answer-id-692526' class='answer   answerof-171239 ' value='692526'   \/><label for='answer-id-692526' id='answer-label-692526' class=' answer'><span>Tax relief on tax depreciation allowances<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171239[]' id='answer-id-692527' class='answer   answerof-171239 ' value='692527'   \/><label for='answer-id-692527' id='answer-label-692527' class=' answer'><span>Bank loan payments<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171239[]' id='answer-id-692528' class='answer   answerof-171239 ' value='692528'   \/><label for='answer-id-692528' id='answer-label-692528' class=' answer'><span>Maintenance payments<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171239[]' id='answer-id-692529' class='answer   answerof-171239 ' value='692529'   \/><label for='answer-id-692529' id='answer-label-692529' class=' answer'><span>Lease payments<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171239[]' id='answer-id-692530' class='answer   answerof-171239 ' value='692530'   \/><label for='answer-id-692530' id='answer-label-692530' class=' answer'><span>Tax relief on the book depreciation<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-15' style=';'><div id='questionWrap-15'  class='   watupro-question-id-171240'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>15. <\/span>A company currently has a 6.25% fixed rate loan but it wishes to change the interest style of the loan to variable by using an interest rate swap directly with the bank. <br \/>\r<br>The bank has quoted the following swap rate: <br \/>\r<br>&#8226; 5.50% - 5.55% in exchange for LIBOR <br \/>\r<br>LIBOR is currently 5%. <br \/>\r<br>If the company enters into the swap and LIBOR remains at 5%, what will the company's interest cost be?<\/div><input type='hidden' name='question_id[]' id='qID_15' value='171240' \/><input type='hidden' id='answerType171240' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171240[]' id='answer-id-692531' class='answer   answerof-171240 ' value='692531'   \/><label for='answer-id-692531' id='answer-label-692531' class=' answer'><span>5.00%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171240[]' id='answer-id-692532' class='answer   answerof-171240 ' value='692532'   \/><label for='answer-id-692532' id='answer-label-692532' class=' answer'><span>5.75%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171240[]' id='answer-id-692533' class='answer   answerof-171240 ' value='692533'   \/><label for='answer-id-692533' id='answer-label-692533' class=' answer'><span>5.70%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171240[]' id='answer-id-692534' class='answer   answerof-171240 ' value='692534'   \/><label for='answer-id-692534' id='answer-label-692534' class=' answer'><span>6.25%<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-16' style=';'><div id='questionWrap-16'  class='   watupro-question-id-171241'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>16. <\/span>A company has: <br \/>\r<br>&#8226; 10 million $1 ordinary shares in issue <br \/>\r<br>&#8226; A current share price of $5.00 a share <br \/>\r<br>&#8226; A WACC of 15% <br \/>\r<br>The company holds $10 million in cash. No interest is earned on this cash. <br \/>\r<br>It will invest this in a project with an expected NPV of $4 million. <br \/>\r<br>In a semi-strong efficient stock market, which of the following is the most likely share price immediately after the announcement of the new investment?<\/div><input type='hidden' name='question_id[]' id='qID_16' value='171241' \/><input type='hidden' id='answerType171241' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171241[]' id='answer-id-692535' class='answer   answerof-171241 ' value='692535'   \/><label for='answer-id-692535' id='answer-label-692535' class=' answer'><span>$5.40<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171241[]' id='answer-id-692536' class='answer   answerof-171241 ' value='692536'   \/><label for='answer-id-692536' id='answer-label-692536' class=' answer'><span>$6.40<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171241[]' id='answer-id-692537' class='answer   answerof-171241 ' value='692537'   \/><label for='answer-id-692537' id='answer-label-692537' class=' answer'><span>$6.80<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171241[]' id='answer-id-692538' class='answer   answerof-171241 ' value='692538'   \/><label for='answer-id-692538' id='answer-label-692538' class=' answer'><span>$5.30<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-17' style=';'><div id='questionWrap-17'  class='   watupro-question-id-171242'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>17. <\/span>A company has in a 5% corporate bond in issue on which there are two loan covenants. <br \/>\r<br>&#8226; Interest cover must not fall below 3 times <br \/>\r<br>&#8226; Retained earnings for the year must not fall below $3.5 million <br \/>\r<br>The Company has 200 million shares in issue. <br \/>\r<br>The most recent dividend per share was $0.04. <br \/>\r<br>The Company intends increasing dividends by 10% next year. <br \/>\r<br>Financial projections for next year are as follows: <br \/>\r<br>Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?<\/div><input type='hidden' name='question_id[]' id='qID_17' value='171242' \/><input type='hidden' id='answerType171242' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171242[]' id='answer-id-692539' class='answer   answerof-171242 ' value='692539'   \/><label for='answer-id-692539' id='answer-label-692539' class=' answer'><span>The company will be in compliance with both covenants.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171242[]' id='answer-id-692540' class='answer   answerof-171242 ' value='692540'   \/><label for='answer-id-692540' id='answer-label-692540' class=' answer'><span>The company will be in breach of both covenants.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171242[]' id='answer-id-692541' class='answer   answerof-171242 ' value='692541'   \/><label for='answer-id-692541' id='answer-label-692541' class=' answer'><span>The company will breach the covenant in respect of retained earnings only.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171242[]' id='answer-id-692542' class='answer   answerof-171242 ' value='692542'   \/><label for='answer-id-692542' id='answer-label-692542' class=' answer'><span>The company will be in breach of the covenant in respect of interest cover only.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-18' style=';'><div id='questionWrap-18'  class='   watupro-question-id-171243'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>18. <\/span>A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios. <br \/>\r<br>The following data currently applies: <br \/>\r<br>&#8226; Profit before interest and tax for the current year is $500,000 <br \/>\r<br>&#8226; Long term debt of $300,000 at a fixed interest rate of 5% <br \/>\r<br>&#8226; 250,000 shares in issue with a share price of $8 <br \/>\r<br>The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000. <br \/>\r<br>The additional debt would carry an interest rate of 3%. <br \/>\r<br>Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment. <br \/>\r<br>The rate of corporate income tax is 30%. <br \/>\r<br>After the investment, which of the following statements is correct?<\/div><input type='hidden' name='question_id[]' id='qID_18' value='171243' \/><input type='hidden' id='answerType171243' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171243[]' id='answer-id-692543' class='answer   answerof-171243 ' value='692543'   \/><label for='answer-id-692543' id='answer-label-692543' class=' answer'><span>Interest cover will fall; P\/E ratio will fall.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171243[]' id='answer-id-692544' class='answer   answerof-171243 ' value='692544'   \/><label for='answer-id-692544' id='answer-label-692544' class=' answer'><span>Interest cover will fall; P\/E ratio will rise.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171243[]' id='answer-id-692545' class='answer   answerof-171243 ' value='692545'   \/><label for='answer-id-692545' id='answer-label-692545' class=' answer'><span>Interest cover will rise; P\/E ratio will rise.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171243[]' id='answer-id-692546' class='answer   answerof-171243 ' value='692546'   \/><label for='answer-id-692546' id='answer-label-692546' class=' answer'><span>Interest cover will rise; P\/E ratio will fall.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-19' style=';'><div id='questionWrap-19'  class='   watupro-question-id-171244'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>19. <\/span>A new company was set up two years ago using the personal financial resources of the founders. <br \/>\r<br>These funds were used to acquire suitable premises. <br \/>\r<br>The company has entered into a long-term lease on the premises which are not yet fully fitted out. <br \/>\r<br>The founders are considering requesting loan finance from the company's bank to fund the purchase of custom-made advanced technology equipment. <br \/>\r<br>No other companies are using this type of equipment. <br \/>\r<br>The company expects to continue to be profitable for the forseeable future. <br \/>\r<br>It re-invests some of its surplus cash in on-going essential research and development. <br \/>\r<br>Which THREE of the following features are likely to be considered negatives by the bank when assessing the company's credit-worthiness?<\/div><input type='hidden' name='question_id[]' id='qID_19' value='171244' \/><input type='hidden' id='answerType171244' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171244[]' id='answer-id-692547' class='answer   answerof-171244 ' value='692547'   \/><label for='answer-id-692547' id='answer-label-692547' class=' answer'><span>The equipment is advanced technology custom-made equipment.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171244[]' id='answer-id-692548' class='answer   answerof-171244 ' value='692548'   \/><label for='answer-id-692548' id='answer-label-692548' class=' answer'><span>The company will continue to remain profitable and to generate net cash.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171244[]' id='answer-id-692549' class='answer   answerof-171244 ' value='692549'   \/><label for='answer-id-692549' id='answer-label-692549' class=' answer'><span>The company premises are on a long-term lease but are not yet fully fitted out.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171244[]' id='answer-id-692550' class='answer   answerof-171244 ' value='692550'   \/><label for='answer-id-692550' id='answer-label-692550' class=' answer'><span>The founders invested their personal financial resources in the company.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171244[]' id='answer-id-692551' class='answer   answerof-171244 ' value='692551'   \/><label for='answer-id-692551' id='answer-label-692551' class=' answer'><span>Essential on-going research and development expenditure is required.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-20' style=';'><div id='questionWrap-20'  class='   watupro-question-id-171245'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>20. <\/span>Company Y plans to diversify into an activity where Company X has an equity beta of 1.6, a debt beta of zero and gearing of 50% (debt\/debt plus equity). <br \/>\r<br>The risk-free rate of return is 5% and the market portfolio is expected to return 10%. <br \/>\r<br>The rate of corporate income tax is 30%. <br \/>\r<br>What would be the risk-adjusted cost of equity if Company Y has 60% equity and 40% debt?<\/div><input type='hidden' name='question_id[]' id='qID_20' value='171245' \/><input type='hidden' id='answerType171245' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171245[]' id='answer-id-692552' class='answer   answerof-171245 ' value='692552'   \/><label for='answer-id-692552' id='answer-label-692552' class=' answer'><span>11.6%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171245[]' id='answer-id-692553' class='answer   answerof-171245 ' value='692553'   \/><label for='answer-id-692553' id='answer-label-692553' class=' answer'><span>11.9%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171245[]' id='answer-id-692554' class='answer   answerof-171245 ' value='692554'   \/><label for='answer-id-692554' id='answer-label-692554' class=' answer'><span>9.1%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171245[]' id='answer-id-692555' class='answer   answerof-171245 ' value='692555'   \/><label for='answer-id-692555' id='answer-label-692555' class=' answer'><span>13%<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-21' style=';'><div id='questionWrap-21'  class='   watupro-question-id-171246'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>21. <\/span>Company Z has identified four potential acquisition targets: companies A, B, C and D. <br \/>\r<br>Company Z has a current equity market value of $580 million. <br \/>\r<br>The price it would have to pay for the equity of each company is as follows: <br \/>\r<br>Only one of the target companies can be acquired and the consideration will be paid in cash. <br \/>\r<br>The following estimations of the new combined value of Company Z have been prepared for each acquisition before deduction of the cash consideration: <br \/>\r<br>Ignoring any premium paid on acquisition, which acquisition should the directors pursue?<\/div><input type='hidden' name='question_id[]' id='qID_21' value='171246' \/><input type='hidden' id='answerType171246' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171246[]' id='answer-id-692556' class='answer   answerof-171246 ' value='692556'   \/><label for='answer-id-692556' id='answer-label-692556' class=' answer'><span>A<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171246[]' id='answer-id-692557' class='answer   answerof-171246 ' value='692557'   \/><label for='answer-id-692557' id='answer-label-692557' class=' answer'><span>B<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171246[]' id='answer-id-692558' class='answer   answerof-171246 ' value='692558'   \/><label for='answer-id-692558' id='answer-label-692558' class=' answer'><span>C<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171246[]' id='answer-id-692559' class='answer   answerof-171246 ' value='692559'   \/><label for='answer-id-692559' id='answer-label-692559' class=' answer'><span>D<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-22' style=';'><div id='questionWrap-22'  class='   watupro-question-id-171247'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>22. <\/span>Which THREE of the following long term changes are most likely to increase the credit rating of a company?<\/div><input type='hidden' name='question_id[]' id='qID_22' value='171247' \/><input type='hidden' id='answerType171247' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171247[]' id='answer-id-692560' class='answer   answerof-171247 ' value='692560'   \/><label for='answer-id-692560' id='answer-label-692560' class=' answer'><span>An increase in the interest cover ratio.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171247[]' id='answer-id-692561' class='answer   answerof-171247 ' value='692561'   \/><label for='answer-id-692561' id='answer-label-692561' class=' answer'><span>A decrease in the (Net debt) \/ (Earnings before interest, tax, depreciation and amortisation) ratio.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171247[]' id='answer-id-692562' class='answer   answerof-171247 ' value='692562'   \/><label for='answer-id-692562' id='answer-label-692562' class=' answer'><span>An increase in the free cashflow generated from operations.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171247[]' id='answer-id-692563' class='answer   answerof-171247 ' value='692563'   \/><label for='answer-id-692563' id='answer-label-692563' class=' answer'><span>A decrease in the (Book value of debt) \/ (Book value of equity) ratio.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171247[]' id='answer-id-692564' class='answer   answerof-171247 ' value='692564'   \/><label for='answer-id-692564' id='answer-label-692564' class=' answer'><span>A decrease in the dividend cover ratio.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-23' style=';'><div id='questionWrap-23'  class='   watupro-question-id-171248'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>23. <\/span>A consultancy company is dependent for profits and growth on the high value individuals it employs. <br \/>\r<br>The company has relatively few tangible assets. <br \/>\r<br>Select the most appropriate reason for the net asset valuation method being considered unsuitable for such a company.<\/div><input type='hidden' name='question_id[]' id='qID_23' value='171248' \/><input type='hidden' id='answerType171248' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171248[]' id='answer-id-692565' class='answer   answerof-171248 ' value='692565'   \/><label for='answer-id-692565' id='answer-label-692565' class=' answer'><span>It does not account for the intangible assets.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171248[]' id='answer-id-692566' class='answer   answerof-171248 ' value='692566'   \/><label for='answer-id-692566' id='answer-label-692566' class=' answer'><span>It accounts for the intangible assets at historical value.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171248[]' id='answer-id-692567' class='answer   answerof-171248 ' value='692567'   \/><label for='answer-id-692567' id='answer-label-692567' class=' answer'><span>It accounts for intangible assets at net realisable value.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171248[]' id='answer-id-692568' class='answer   answerof-171248 ' value='692568'   \/><label for='answer-id-692568' id='answer-label-692568' class=' answer'><span>It does not account for tangible assets.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-24' style=';'><div id='questionWrap-24'  class='   watupro-question-id-171249'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>24. <\/span>A company's gearing (measured as debt\/(debt + equity)) is currently 60% and it is investigating whether an optimal gearing structure exists within the industry. <br \/>\r<br>It has analysed the capital structure of similar companies in the industry and it would <br \/>\r<br>appear that there is evidence supporting the traditional theory of capital structure. <br \/>\r<br>Companies with the lowest WACC in the industry have gearing of around 45% to 50%. <br \/>\r<br>Which of the following actions would result in the company achieving a more optimal capital structure?<\/div><input type='hidden' name='question_id[]' id='qID_24' value='171249' \/><input type='hidden' id='answerType171249' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171249[]' id='answer-id-692569' class='answer   answerof-171249 ' value='692569'   \/><label for='answer-id-692569' id='answer-label-692569' class=' answer'><span>Undertaking a rights issue of equity to repay some of its debt.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171249[]' id='answer-id-692570' class='answer   answerof-171249 ' value='692570'   \/><label for='answer-id-692570' id='answer-label-692570' class=' answer'><span>Refinancing to replace some of its short term debt with long term debt.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171249[]' id='answer-id-692571' class='answer   answerof-171249 ' value='692571'   \/><label for='answer-id-692571' id='answer-label-692571' class=' answer'><span>Increasing the level of dividend to return more cash to shareholders.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171249[]' id='answer-id-692572' class='answer   answerof-171249 ' value='692572'   \/><label for='answer-id-692572' id='answer-label-692572' class=' answer'><span>Using retained cash to undertake a buyback of some of its equity.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-25' style=';'><div id='questionWrap-25'  class='   watupro-question-id-171250'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>25. <\/span>CORRECT TEXT <br \/>\r<br>A listed company follows a policy of paying a constant dividend. <br \/>\r<br>The following information is available: <br \/>\r<br>&#8226; Issued share capital (nominal value $0.50) $60 million <br \/>\r<br>&#8226; Current market capitalisation $480 million <br \/>\r<br>The shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors wish to retain as much cash as possible to fund new investments. They therefore plan to announce a 1-for-10 scrip dividend to replace the usual cash dividend. <br \/>\r<br>Assuming no other influence on share price, what is the expected share price following the scrip dividend? <br \/>\r<br>Give your answer to 2 decimal places. <br \/>\r<br>$ ?<\/div><input type='hidden' name='question_id[]' id='qID_25' value='171250' \/><input type='hidden' id='answerType171250' value='textarea'><!-- end question-content--><\/div><div class='question-choices '><p><textarea name='answer-171250[]' id='textarea_q_171250' class='watupro-textarea-medium' rows='5' cols='80'><\/textarea>\n<\/p><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-26' style=';'><div id='questionWrap-26'  class='   watupro-question-id-171251'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>26. <\/span>A company plans to raise finance for a new project. <br \/>\r<br>It is considering either the issue of a redeemable cumulative preference share or a Eurobond. <br \/>\r<br>Advise the directors which of the following statements would justify the issue of preference shares over a bond?<\/div><input type='hidden' name='question_id[]' id='qID_26' value='171251' \/><input type='hidden' id='answerType171251' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171251[]' id='answer-id-692574' class='answer   answerof-171251 ' value='692574'   \/><label for='answer-id-692574' id='answer-label-692574' class=' answer'><span>Preference shares are not secured against the assets of the business - however, the Eurobond would be.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171251[]' id='answer-id-692575' class='answer   answerof-171251 ' value='692575'   \/><label for='answer-id-692575' id='answer-label-692575' class=' answer'><span>If profits are poor, dividends do not have to be paid on the preference share - however, interest would need to be paid on the Eurobond.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171251[]' id='answer-id-692576' class='answer   answerof-171251 ' value='692576'   \/><label for='answer-id-692576' id='answer-label-692576' class=' answer'><span>The issue of the preference share would reduce the company's gearing - however, the Eurobond would increase it.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171251[]' id='answer-id-692577' class='answer   answerof-171251 ' value='692577'   \/><label for='answer-id-692577' id='answer-label-692577' class=' answer'><span>The company can claim tax relief on the dividend paid on the preference share at a higher rate than the interest paid on the Eurobond.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-27' style=';'><div id='questionWrap-27'  class='   watupro-question-id-171252'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>27. <\/span>A listed company is financed by debt and equity. <br \/>\r<br>If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant imposed by one of its lenders. <br \/>\r<br>The following data is relevant: <br \/>\r<br>The company now requires $800 million additional funding for a major expansion programme. <br \/>\r<br>Which of the following is the most appropriate as a source of finance for this expansion programme?<\/div><input type='hidden' name='question_id[]' id='qID_27' value='171252' \/><input type='hidden' id='answerType171252' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171252[]' id='answer-id-692578' class='answer   answerof-171252 ' value='692578'   \/><label for='answer-id-692578' id='answer-label-692578' class=' answer'><span>Retained earnings<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171252[]' id='answer-id-692579' class='answer   answerof-171252 ' value='692579'   \/><label for='answer-id-692579' id='answer-label-692579' class=' answer'><span>Private placement of a bond<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171252[]' id='answer-id-692580' class='answer   answerof-171252 ' value='692580'   \/><label for='answer-id-692580' id='answer-label-692580' class=' answer'><span>Rights issue<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171252[]' id='answer-id-692581' class='answer   answerof-171252 ' value='692581'   \/><label for='answer-id-692581' id='answer-label-692581' class=' answer'><span>Bank overdraft<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-28' style=';'><div id='questionWrap-28'  class='   watupro-question-id-171253'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>28. <\/span>Company T has 1,000 million shares in issue with a current share price of $10 each. <br \/>\r<br>Company V has 300 million shares in issue with a current share price of $5 each. <br \/>\r<br>Company T is considering acquiring Company V. <br \/>\r<br>Total synergy gains of $100 million have been estimated. <br \/>\r<br>The purchase of Company V's shares would be by cash at a 10% premium above the current share price. <br \/>\r<br>In seeking approval for the acquisition, the likely reaction from T's shareholders will be:<\/div><input type='hidden' name='question_id[]' id='qID_28' value='171253' \/><input type='hidden' id='answerType171253' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171253[]' id='answer-id-692582' class='answer   answerof-171253 ' value='692582'   \/><label for='answer-id-692582' id='answer-label-692582' class=' answer'><span>accepted as there is $100 million of synergy which will all go to T's shareholders.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171253[]' id='answer-id-692583' class='answer   answerof-171253 ' value='692583'   \/><label for='answer-id-692583' id='answer-label-692583' class=' answer'><span>accepted as there will be an increase in the value of the business of $1,500 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171253[]' id='answer-id-692584' class='answer   answerof-171253 ' value='692584'   \/><label for='answer-id-692584' id='answer-label-692584' class=' answer'><span>rejected as T's shareholders will see a decrease in their wealth overall of $50 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171253[]' id='answer-id-692585' class='answer   answerof-171253 ' value='692585'   \/><label for='answer-id-692585' id='answer-label-692585' class=' answer'><span>rejected as T's shareholders will not be willing to pay more than $1,500 million for<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-29' style=';'><div id='questionWrap-29'  class='   watupro-question-id-171254'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>29. <\/span>Which of the following statements is true of a spin-off (or demerger)?<\/div><input type='hidden' name='question_id[]' id='qID_29' value='171254' \/><input type='hidden' id='answerType171254' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171254[]' id='answer-id-692586' class='answer   answerof-171254 ' value='692586'   \/><label for='answer-id-692586' id='answer-label-692586' class=' answer'><span>Raises finance to fund new projects.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171254[]' id='answer-id-692587' class='answer   answerof-171254 ' value='692587'   \/><label for='answer-id-692587' id='answer-label-692587' class=' answer'><span>Changes the ownership structure of the core entity by introducing new shareholders.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171254[]' id='answer-id-692588' class='answer   answerof-171254 ' value='692588'   \/><label for='answer-id-692588' id='answer-label-692588' class=' answer'><span>Allows investors to identify the true value of the demerged business.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171254[]' id='answer-id-692589' class='answer   answerof-171254 ' value='692589'   \/><label for='answer-id-692589' id='answer-label-692589' class=' answer'><span>Increases the risk of a takeover bid for the core entity.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-30' style=';'><div id='questionWrap-30'  class='   watupro-question-id-171255'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>30. <\/span>A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit margin of at least 10% each year. <br \/>\r<br>Relevant data: <br \/>\r<br>&#8226; The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose currency is the F$. <br \/>\r<br>&#8226; All purchases are from Country G whose currency is the G$. <br \/>\r<br>&#8226; The settlement of all transactions is in the currency of the customer or supplier. <br \/>\r<br>Which of the following changes would be most likely to help the company achieve its objective?<\/div><input type='hidden' name='question_id[]' id='qID_30' value='171255' \/><input type='hidden' id='answerType171255' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171255[]' id='answer-id-692590' class='answer   answerof-171255 ' value='692590'   \/><label for='answer-id-692590' id='answer-label-692590' class=' answer'><span>The D$ strengthens against the E$ over time.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171255[]' id='answer-id-692591' class='answer   answerof-171255 ' value='692591'   \/><label for='answer-id-692591' id='answer-label-692591' class=' answer'><span>The F$ weakens against the D$ over time.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171255[]' id='answer-id-692592' class='answer   answerof-171255 ' value='692592'   \/><label for='answer-id-692592' id='answer-label-692592' class=' answer'><span>The D$ strengthens against the G$ over time.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171255[]' id='answer-id-692593' class='answer   answerof-171255 ' value='692593'   \/><label for='answer-id-692593' id='answer-label-692593' class=' answer'><span>The D$ weakens against the G$ over time.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-31' style=';'><div id='questionWrap-31'  class='   watupro-question-id-171256'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>31. <\/span>A company proposes to value itself based on the net present value of estimated future cash flows. <br \/>\r<br>Relevant data: <br \/>\r<br>&#8226; The cash flow for the next three years is expected to be &pound;100 million each year <br \/>\r<br>&#8226; The cash flow after year 3 will grow at 2% to perpetuity <br \/>\r<br>&#8226; The cost of capital is 12% <br \/>\r<br>The value of the company to the nearest $ million is:<\/div><input type='hidden' name='question_id[]' id='qID_31' value='171256' \/><input type='hidden' id='answerType171256' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171256[]' id='answer-id-692594' class='answer   answerof-171256 ' value='692594'   \/><label for='answer-id-692594' id='answer-label-692594' class=' answer'><span>$966 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171256[]' id='answer-id-692595' class='answer   answerof-171256 ' value='692595'   \/><label for='answer-id-692595' id='answer-label-692595' class=' answer'><span>$1,260 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171256[]' id='answer-id-692596' class='answer   answerof-171256 ' value='692596'   \/><label for='answer-id-692596' id='answer-label-692596' class=' answer'><span>$889 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171256[]' id='answer-id-692597' class='answer   answerof-171256 ' value='692597'   \/><label for='answer-id-692597' id='answer-label-692597' class=' answer'><span>$834 million<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-32' style=';'><div id='questionWrap-32'  class='   watupro-question-id-171257'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>32. <\/span>Company A is a listed company that produces pottery goods which it sells throughout Europe. The pottery is then delivered to a network of self employed artists who are contracted to paint the pottery in their own homes. Finished goods are distributed by network of sales agents.The directors of Company A are now considering acquiring one or more smaller companies by means of vertical integration to improve profit margins. <br \/>\r<br>Advise the Board of Company A which of the following acquisitions is most likely to achieve the stated aim of vertical integration?<\/div><input type='hidden' name='question_id[]' id='qID_32' value='171257' \/><input type='hidden' id='answerType171257' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171257[]' id='answer-id-692598' class='answer   answerof-171257 ' value='692598'   \/><label for='answer-id-692598' id='answer-label-692598' class=' answer'><span>A company in a similar market to Company<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171257[]' id='answer-id-692599' class='answer   answerof-171257 ' value='692599'   \/><label for='answer-id-692599' id='answer-label-692599' class=' answer'><span>A pottery factory in the Middle East.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171257[]' id='answer-id-692600' class='answer   answerof-171257 ' value='692600'   \/><label for='answer-id-692600' id='answer-label-692600' class=' answer'><span>A company that produces accessories.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171257[]' id='answer-id-692601' class='answer   answerof-171257 ' value='692601'   \/><label for='answer-id-692601' id='answer-label-692601' class=' answer'><span>A listed international logistics firm.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-33' style=';'><div id='questionWrap-33'  class='   watupro-question-id-171258'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>33. <\/span>An all equity financed company reported earnings for the year ending 31 December 20X1 of $5 million. <br \/>\r<br>One of its financial objectives is to increase earnings by 5% each year. <br \/>\r<br>In the year ending 31 December 20X2 it financed a project by issuing a bond with a $1 million nominal value and a coupon rate of 7%. <br \/>\r<br>The company pays corporate income tax at 30%. <br \/>\r<br>If the company is to achieve its earnings target for the year ending 31 December 20X2, what is the minimum operating profit (profit before interest and tax) that it must achieve?<\/div><input type='hidden' name='question_id[]' id='qID_33' value='171258' \/><input type='hidden' id='answerType171258' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171258[]' id='answer-id-692602' class='answer   answerof-171258 ' value='692602'   \/><label for='answer-id-692602' id='answer-label-692602' class=' answer'><span>$5.25 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171258[]' id='answer-id-692603' class='answer   answerof-171258 ' value='692603'   \/><label for='answer-id-692603' id='answer-label-692603' class=' answer'><span>$7.50 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171258[]' id='answer-id-692604' class='answer   answerof-171258 ' value='692604'   \/><label for='answer-id-692604' id='answer-label-692604' class=' answer'><span>$7.57 million<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171258[]' id='answer-id-692605' class='answer   answerof-171258 ' value='692605'   \/><label for='answer-id-692605' id='answer-label-692605' class=' answer'><span>$8.40 million<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-34' style=';'><div id='questionWrap-34'  class='   watupro-question-id-171259'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>34. <\/span>Which THREE of the following non-financial objectives would be most appropriate for a listed company in the food retailing industry?<\/div><input type='hidden' name='question_id[]' id='qID_34' value='171259' \/><input type='hidden' id='answerType171259' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171259[]' id='answer-id-692606' class='answer   answerof-171259 ' value='692606'   \/><label for='answer-id-692606' id='answer-label-692606' class=' answer'><span>Reduce customer complaints<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171259[]' id='answer-id-692607' class='answer   answerof-171259 ' value='692607'   \/><label for='answer-id-692607' id='answer-label-692607' class=' answer'><span>Increase customer service quality<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171259[]' id='answer-id-692608' class='answer   answerof-171259 ' value='692608'   \/><label for='answer-id-692608' id='answer-label-692608' class=' answer'><span>Reduce production time<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171259[]' id='answer-id-692609' class='answer   answerof-171259 ' value='692609'   \/><label for='answer-id-692609' id='answer-label-692609' class=' answer'><span>Improve staff morale<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171259[]' id='answer-id-692610' class='answer   answerof-171259 ' value='692610'   \/><label for='answer-id-692610' id='answer-label-692610' class=' answer'><span>Reduce raw material wastage<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-35' style=';'><div id='questionWrap-35'  class='   watupro-question-id-171260'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>35. <\/span>A company has a financial objective of maintaining a gearing ratio of between 30% and 40%, where gearing is defined as debt\/equity at market values. <br \/>\r<br>The company has been affected by a recent economic downturn leading to a shortage of liquidity and a fall in the share price during 20X1. <br \/>\r<br>On 31 December 20X1 the company was funded by: <br \/>\r<br>&#8226; Share capital of 4 million $1 shares trading at $4.0 per share. <br \/>\r<br>&#8226; Debt of $7 million floating rate borrowings. <br \/>\r<br>The directors plan to raise $2 million additional borrowings in order to improve liquidity. <br \/>\r<br>They expect this to reassure investors about the company's liquidity position and result in a rise in the share price to $4.2 per share. <br \/>\r<br>Is the planned increase in borrowings expected to help the company meet its gearing objective?<\/div><input type='hidden' name='question_id[]' id='qID_35' value='171260' \/><input type='hidden' id='answerType171260' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171260[]' id='answer-id-692611' class='answer   answerof-171260 ' value='692611'   \/><label for='answer-id-692611' id='answer-label-692611' class=' answer'><span>No, gearing would increase but the gearing objective would be met both before and after the announcement.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171260[]' id='answer-id-692612' class='answer   answerof-171260 ' value='692612'   \/><label for='answer-id-692612' id='answer-label-692612' class=' answer'><span>No, gearing would increase and the gearing objective would be exceeded both before and after the announcement.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171260[]' id='answer-id-692613' class='answer   answerof-171260 ' value='692613'   \/><label for='answer-id-692613' id='answer-label-692613' class=' answer'><span>No, gearing would increase and the gearing objective would be met before the announcement but exceeded after the announcement.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171260[]' id='answer-id-692614' class='answer   answerof-171260 ' value='692614'   \/><label for='answer-id-692614' id='answer-label-692614' class=' answer'><span>Yes, gearing would fall and the gearing objective would be exceeded before the announcement but met after the announcement.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-36' style=';'><div id='questionWrap-36'  class='   watupro-question-id-171261'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>36. <\/span>A company has a covenant on its 5% long-term bond, stipulating that its retained earnings must not fall below $2 million. <br \/>\r<br>The company has 100 million shares in issue. <br \/>\r<br>Its most recent dividend was $0.045 per share. It has committed to grow the dividend per share by 4% each year. <br \/>\r<br>The nominal value of the bond is $60 million. It is currently trading at 80% of its nominal value. <br \/>\r<br>Next year's earnings before interest and taxation are projected to be $11.25 million. <br \/>\r<br>The rate of corporate tax is 20%. <br \/>\r<br>If the company increases the dividend by 4%, advise the Board of Directors if the level of retained earnings will comply with the covenant?<\/div><input type='hidden' name='question_id[]' id='qID_36' value='171261' \/><input type='hidden' id='answerType171261' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171261[]' id='answer-id-692615' class='answer   answerof-171261 ' value='692615'   \/><label for='answer-id-692615' id='answer-label-692615' class=' answer'><span>Covenant is not breached as retained earnings = $2.40 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171261[]' id='answer-id-692616' class='answer   answerof-171261 ' value='692616'   \/><label for='answer-id-692616' id='answer-label-692616' class=' answer'><span>Covenant is not breached as retained earnings = $2.10 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171261[]' id='answer-id-692617' class='answer   answerof-171261 ' value='692617'   \/><label for='answer-id-692617' id='answer-label-692617' class=' answer'><span>Covenant is breached as retained earnings = $1.92 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171261[]' id='answer-id-692618' class='answer   answerof-171261 ' value='692618'   \/><label for='answer-id-692618' id='answer-label-692618' class=' answer'><span>The covenant is not breached as retained earnings = $4.68 million.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-37' style=';'><div id='questionWrap-37'  class='   watupro-question-id-171262'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>37. <\/span>A venture capitalist has made an equity investment in a private company and is evaluating possible methods by which it can exit the investment over the next 3 years. The private company shareholders comprise the four original founders and the venture capitalist. <br \/>\r<br>Advise the venture capitalist which THREE of the following methods will enable it to exit its equity investment?<\/div><input type='hidden' name='question_id[]' id='qID_37' value='171262' \/><input type='hidden' id='answerType171262' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171262[]' id='answer-id-692619' class='answer   answerof-171262 ' value='692619'   \/><label for='answer-id-692619' id='answer-label-692619' class=' answer'><span>The private company buys back the equity shares.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171262[]' id='answer-id-692620' class='answer   answerof-171262 ' value='692620'   \/><label for='answer-id-692620' id='answer-label-692620' class=' answer'><span>The private company undertakes a 1 for 4 rights issue.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171262[]' id='answer-id-692621' class='answer   answerof-171262 ' value='692621'   \/><label for='answer-id-692621' id='answer-label-692621' class=' answer'><span>The private company obtains a stock market listing.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171262[]' id='answer-id-692622' class='answer   answerof-171262 ' value='692622'   \/><label for='answer-id-692622' id='answer-label-692622' class=' answer'><span>The private company conducts a stock split of its share capital.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171262[]' id='answer-id-692623' class='answer   answerof-171262 ' value='692623'   \/><label for='answer-id-692623' id='answer-label-692623' class=' answer'><span>Trade sale of shares to an external 3rd party.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-38' style=';'><div id='questionWrap-38'  class='   watupro-question-id-171263'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>38. <\/span>Company A has a cash surplus. <br \/>\r<br>The discount rate used for a typical project is the company's weighted average cost of capital of 10%. <br \/>\r<br>No investment projects will be available for at least 2 years. <br \/>\r<br>Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?<\/div><input type='hidden' name='question_id[]' id='qID_38' value='171263' \/><input type='hidden' id='answerType171263' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171263[]' id='answer-id-692624' class='answer   answerof-171263 ' value='692624'   \/><label for='answer-id-692624' id='answer-label-692624' class=' answer'><span>Investing in a 2 year bond returning 5% each year.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171263[]' id='answer-id-692625' class='answer   answerof-171263 ' value='692625'   \/><label for='answer-id-692625' id='answer-label-692625' class=' answer'><span>Investing in the local money market at 4% each year.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171263[]' id='answer-id-692626' class='answer   answerof-171263 ' value='692626'   \/><label for='answer-id-692626' id='answer-label-692626' class=' answer'><span>Maintaining the cash in a current account.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171263[]' id='answer-id-692627' class='answer   answerof-171263 ' value='692627'   \/><label for='answer-id-692627' id='answer-label-692627' class=' answer'><span>Paying the surplus cash as a dividend at the earliest opportunity.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-39' style=';'><div id='questionWrap-39'  class='   watupro-question-id-171264'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>39. <\/span>Company P is a pharmaceutical company listed on an alternative investment market. <br \/>\r<br>The company is developing a new drug which it hopes to market in approximately six years' time. <br \/>\r<br>Company P is owned and managed by a group of doctors who wish to retain control of the company. The company operates from leased laboratories with minimal fixed assets. <br \/>\r<br>Its value comes from the quality of its research staff and their research. <br \/>\r<br>The company currently has one approved drug which generates sufficient cashflow to cover day to day operations but not sufficient for major new research and development. <br \/>\r<br>Company P wish to raise debt finance to develop the new drug. <br \/>\r<br>Recommend which of the following types of debt finance would be most appropriate for Company P to help finance the development of this new drug.<\/div><input type='hidden' name='question_id[]' id='qID_39' value='171264' \/><input type='hidden' id='answerType171264' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171264[]' id='answer-id-692628' class='answer   answerof-171264 ' value='692628'   \/><label for='answer-id-692628' id='answer-label-692628' class=' answer'><span>6% Eurobond repayable at par in 5 years' time.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171264[]' id='answer-id-692629' class='answer   answerof-171264 ' value='692629'   \/><label for='answer-id-692629' id='answer-label-692629' class=' answer'><span>5% Bond repayable at par in 7 years' time.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171264[]' id='answer-id-692630' class='answer   answerof-171264 ' value='692630'   \/><label for='answer-id-692630' id='answer-label-692630' class=' answer'><span>3% Commercial Paper.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171264[]' id='answer-id-692631' class='answer   answerof-171264 ' value='692631'   \/><label for='answer-id-692631' id='answer-label-692631' class=' answer'><span>4% Convertible bond with a conversion ratio of 350 ordinary shares per bond.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-40' style=';'><div id='questionWrap-40'  class='   watupro-question-id-171265'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>40. <\/span>Company C has received an unwelcome takeover bid from Company P. <br \/>\r<br>Company P is approximately twice the size of Company C based on market capitalisation. <br \/>\r<br>Although the two companies have some common business interests, the main aim of the bid is diversification for Company P. <br \/>\r<br>The offer from Company P is a share exchange of 2 shares in Company P for 3 shares in Company C. <br \/>\r<br>There is a cash alternative of $5.50 for each Company C share. <br \/>\r<br>Company C has substantial cash balances which the directors were planning to use to fund an acquisition. <br \/>\r<br>These plans have not been announced to the market. <br \/>\r<br>The following share price information is relevant. All prices are in $. <br \/>\r<br>Which of the following would be the most appropriate action by Company C's directors following receipt of this hostile bid?<\/div><input type='hidden' name='question_id[]' id='qID_40' value='171265' \/><input type='hidden' id='answerType171265' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171265[]' id='answer-id-692632' class='answer   answerof-171265 ' value='692632'   \/><label for='answer-id-692632' id='answer-label-692632' class=' answer'><span>Write to shareholders explaining fully why the company's share price is under valued.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171265[]' id='answer-id-692633' class='answer   answerof-171265 ' value='692633'   \/><label for='answer-id-692633' id='answer-label-692633' class=' answer'><span>Change the Articles of Association to increase the percentage of shareholder votes \r\nrequired to approve a takeover.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171265[]' id='answer-id-692634' class='answer   answerof-171265 ' value='692634'   \/><label for='answer-id-692634' id='answer-label-692634' class=' answer'><span>Pay a one-off special dividend.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171265[]' id='answer-id-692635' class='answer   answerof-171265 ' value='692635'   \/><label for='answer-id-692635' id='answer-label-692635' class=' answer'><span>Refer the bid to the country's competition authorities.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-41' style=';'><div id='questionWrap-41'  class='   watupro-question-id-171266'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>41. <\/span>The Board of Directors of a listed company have decided that it needs to increase its equity capital to ensure it is in a more stable financial position. <br \/>\r<br>The shareholder profile is a mix of institutional and individual small shareholders. <br \/>\r<br>The board is considering either: <br \/>\r<br>&#8226; A scrip dividend <br \/>\r<br>&#8226; A zero dividend <br \/>\r<br>Which THREE of the following would be considered disadvantages of a scrip dividend compared to a zero dividend?<\/div><input type='hidden' name='question_id[]' id='qID_41' value='171266' \/><input type='hidden' id='answerType171266' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171266[]' id='answer-id-692636' class='answer   answerof-171266 ' value='692636'   \/><label for='answer-id-692636' id='answer-label-692636' class=' answer'><span>A scrip dividend results in distributable reserves being moved to non-distributable reserves.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171266[]' id='answer-id-692637' class='answer   answerof-171266 ' value='692637'   \/><label for='answer-id-692637' id='answer-label-692637' class=' answer'><span>A scrip dividend will dilute the control of current shareholders.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171266[]' id='answer-id-692638' class='answer   answerof-171266 ' value='692638'   \/><label for='answer-id-692638' id='answer-label-692638' class=' answer'><span>A scrip dividend results in more shares in issue which will create an expectation for future dividends.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171266[]' id='answer-id-692639' class='answer   answerof-171266 ' value='692639'   \/><label for='answer-id-692639' id='answer-label-692639' class=' answer'><span>There will be company secretarial and additional administration involved with a scrip dividend.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171266[]' id='answer-id-692640' class='answer   answerof-171266 ' value='692640'   \/><label for='answer-id-692640' id='answer-label-692640' class=' answer'><span>A scrip issue may give shareholders the impression that they are receiving something of value.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-42' style=';'><div id='questionWrap-42'  class='   watupro-question-id-171267'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>42. <\/span>A company's current earnings before interest and taxation are $5 million. <br \/>\r<br>These are expected to remain constant for the forseeable future. <br \/>\r<br>The company has 10 million shares in issue which currently trade at $3.60. <br \/>\r<br>It also has a $10 million long term floating rate loan. <br \/>\r<br>The current interest rate on this loan is 5%. <br \/>\r<br>The company pays tax at 20%. <br \/>\r<br>The company expects interest rates to increase next year to 6% and it's Price\/Earnings (P\/E) ratio to move to 9.5 times by the end of next year. <br \/>\r<br>What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P\/E movement both occur?<\/div><input type='hidden' name='question_id[]' id='qID_42' value='171267' \/><input type='hidden' id='answerType171267' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171267[]' id='answer-id-692641' class='answer   answerof-171267 ' value='692641'   \/><label for='answer-id-692641' id='answer-label-692641' class=' answer'><span>Reduction of 7%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171267[]' id='answer-id-692642' class='answer   answerof-171267 ' value='692642'   \/><label for='answer-id-692642' id='answer-label-692642' class=' answer'><span>Reduction of 5%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171267[]' id='answer-id-692643' class='answer   answerof-171267 ' value='692643'   \/><label for='answer-id-692643' id='answer-label-692643' class=' answer'><span>Reduction of 1%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171267[]' id='answer-id-692644' class='answer   answerof-171267 ' value='692644'   \/><label for='answer-id-692644' id='answer-label-692644' class=' answer'><span>Reduction of 0%<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-43' style=';'><div id='questionWrap-43'  class='   watupro-question-id-171268'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>43. <\/span>A company financed by equity and debt can be valued by discounting:<\/div><input type='hidden' name='question_id[]' id='qID_43' value='171268' \/><input type='hidden' id='answerType171268' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171268[]' id='answer-id-692645' class='answer   answerof-171268 ' value='692645'   \/><label for='answer-id-692645' id='answer-label-692645' class=' answer'><span>free cash flow before interest at WAC<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171268[]' id='answer-id-692646' class='answer   answerof-171268 ' value='692646'   \/><label for='answer-id-692646' id='answer-label-692646' class=' answer'><span>free cash flow before interest at the cost of equity.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171268[]' id='answer-id-692647' class='answer   answerof-171268 ' value='692647'   \/><label for='answer-id-692647' id='answer-label-692647' class=' answer'><span>free cash flow after interest at WAC<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171268[]' id='answer-id-692648' class='answer   answerof-171268 ' value='692648'   \/><label for='answer-id-692648' id='answer-label-692648' class=' answer'><span>free cash flow after interest at the cost of equity.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-44' style=';'><div id='questionWrap-44'  class='   watupro-question-id-171269'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>44. <\/span>A company is deciding whether to offer a scrip dividend or a cash dividend to its <br \/>\r<br>shareholders. <br \/>\r<br>Although the company has excellent long-term growth prospects, it is experiencing short-term profit and cash flow problems. <br \/>\r<br>Which of the following statements is most likely to be a reason for choosing the scrip dividend?<\/div><input type='hidden' name='question_id[]' id='qID_44' value='171269' \/><input type='hidden' id='answerType171269' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171269[]' id='answer-id-692649' class='answer   answerof-171269 ' value='692649'   \/><label for='answer-id-692649' id='answer-label-692649' class=' answer'><span>It is a way of raising additional finance to promote future growth.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171269[]' id='answer-id-692650' class='answer   answerof-171269 ' value='692650'   \/><label for='answer-id-692650' id='answer-label-692650' class=' answer'><span>It is a way of increasing earnings per share.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171269[]' id='answer-id-692651' class='answer   answerof-171269 ' value='692651'   \/><label for='answer-id-692651' id='answer-label-692651' class=' answer'><span>It is a way of encouraging shareholders to allow cash to be retained in the business.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171269[]' id='answer-id-692652' class='answer   answerof-171269 ' value='692652'   \/><label for='answer-id-692652' id='answer-label-692652' class=' answer'><span>It is a way of increasing dividend per share.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-45' style=';'><div id='questionWrap-45'  class='   watupro-question-id-171270'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>45. <\/span>Listed company R is in the process of making a cash offer for the equity of unlisted company S. <br \/>\r<br>Company R has a market capitalisation of $200 million and a price\/earnings ratio of 10. <br \/>\r<br>Company S has a market capitalisation of $50 million and earnings of $7 million. <br \/>\r<br>Company R intends to offer $60 million and expects to be able to realise synergistic benefits of $20 million by combining the two businesses. This estimate excludes the estimated $8 million cost of integrating the two businesses. <br \/>\r<br>Which of the following figures need to be used when calculating the value of the combined entity in $ millions?<\/div><input type='hidden' name='question_id[]' id='qID_45' value='171270' \/><input type='hidden' id='answerType171270' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171270[]' id='answer-id-692653' class='answer   answerof-171270 ' value='692653'   \/><label for='answer-id-692653' id='answer-label-692653' class=' answer'><span>8, 20, 50, 60, 200<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171270[]' id='answer-id-692654' class='answer   answerof-171270 ' value='692654'   \/><label for='answer-id-692654' id='answer-label-692654' class=' answer'><span>8, 20, 50, 200<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171270[]' id='answer-id-692655' class='answer   answerof-171270 ' value='692655'   \/><label for='answer-id-692655' id='answer-label-692655' class=' answer'><span>20, 50, 60, 200<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171270[]' id='answer-id-692656' class='answer   answerof-171270 ' value='692656'   \/><label for='answer-id-692656' id='answer-label-692656' class=' answer'><span>7, 10, 20, 50, 200<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-46' style=';'><div id='questionWrap-46'  class='   watupro-question-id-171271'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>46. <\/span>CORRECT TEXT <br \/>\r<br>A company wishes to raise new finance using a rights issue. The following data applies: <br \/>\r<br>&#8226; There are 10 million shares in issue with a market value of $4 each <br \/>\r<br>&#8226; The terms of the rights will be 1 new share for 4 existing shares held <br \/>\r<br>&#8226; After the rights issue, the theoretical ex-rights price (TERP) will be $3.80 <br \/>\r<br>Assuming all shareholders take up their rights, how much new finance will be raised ? <br \/>\r<br>Give your answer to one decimal place. <br \/>\r<br>$ ? million<\/div><input type='hidden' name='question_id[]' id='qID_46' value='171271' \/><input type='hidden' id='answerType171271' value='textarea'><!-- end question-content--><\/div><div class='question-choices '><p><textarea name='answer-171271[]' id='textarea_q_171271' class='watupro-textarea-medium' rows='5' cols='80'><\/textarea>\n<\/p><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-47' style=';'><div id='questionWrap-47'  class='   watupro-question-id-171272'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>47. <\/span>On 31 October 20X3: <br \/>\r<br>&#8226; A company expected to agree a foreign currency transaction in January 20X4 for settlement on 31 March 20X4. <br \/>\r<br>&#8226; The company hedged the currency risk using a forward contract at nil cost for settlement on 31 March 20X4. <br \/>\r<br>&#8226; The transaction was correctly treated as a cash flow hedge in accordance with IAS 39 Financial Instruments: Recognition and Measurement. <br \/>\r<br>On 31 December 20X3, the financial year end, the fair value of the forward contract was $10,000 (asset). <br \/>\r<br>How should the increase in the fair value of the forward contract be treated within the financial statements for the year ended 31 December 20X3?<\/div><input type='hidden' name='question_id[]' id='qID_47' value='171272' \/><input type='hidden' id='answerType171272' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171272[]' id='answer-id-692658' class='answer   answerof-171272 ' value='692658'   \/><label for='answer-id-692658' id='answer-label-692658' class=' answer'><span>Not recognised in 20X3 as the forward contract is not settled until after the year end.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171272[]' id='answer-id-692659' class='answer   answerof-171272 ' value='692659'   \/><label for='answer-id-692659' id='answer-label-692659' class=' answer'><span>Not recognised in 20X3 as the gain will be offset by a loss on the hedged transaction.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171272[]' id='answer-id-692660' class='answer   answerof-171272 ' value='692660'   \/><label for='answer-id-692660' id='answer-label-692660' class=' answer'><span>A $10,000 profit will be recognised within the Income Statement.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171272[]' id='answer-id-692661' class='answer   answerof-171272 ' value='692661'   \/><label for='answer-id-692661' id='answer-label-692661' class=' answer'><span>A $10,000 profit will be recognised within other comprehensive income.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-48' style=';'><div id='questionWrap-48'  class='   watupro-question-id-171273'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>48. <\/span>Which THREE of the following remain unchanged over the life of a 10 year fixed rate bond?<\/div><input type='hidden' name='question_id[]' id='qID_48' value='171273' \/><input type='hidden' id='answerType171273' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171273[]' id='answer-id-692662' class='answer   answerof-171273 ' value='692662'   \/><label for='answer-id-692662' id='answer-label-692662' class=' answer'><span>The coupon rate<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171273[]' id='answer-id-692663' class='answer   answerof-171273 ' value='692663'   \/><label for='answer-id-692663' id='answer-label-692663' class=' answer'><span>The yield<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171273[]' id='answer-id-692664' class='answer   answerof-171273 ' value='692664'   \/><label for='answer-id-692664' id='answer-label-692664' class=' answer'><span>The market value<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171273[]' id='answer-id-692665' class='answer   answerof-171273 ' value='692665'   \/><label for='answer-id-692665' id='answer-label-692665' class=' answer'><span>The nominal value<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171273[]' id='answer-id-692666' class='answer   answerof-171273 ' value='692666'   \/><label for='answer-id-692666' id='answer-label-692666' class=' answer'><span>The amount payable on maturity<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-49' style=';'><div id='questionWrap-49'  class='   watupro-question-id-171274'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>49. <\/span>A company's main objective is to achieve an average growth in dividends of 10% a year. <br \/>\r<br>In the most recent financial year: <br \/>\r<br>Sales are expected to grow at 8% a year over the next 5 years. <br \/>\r<br>Costs are expected to grow at 5% a year over the next 5 years. <br \/>\r<br>What is the minimum dividend payout ratio in 5 years' time that would allow the company to achieve its objective?<\/div><input type='hidden' name='question_id[]' id='qID_49' value='171274' \/><input type='hidden' id='answerType171274' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171274[]' id='answer-id-692667' class='answer   answerof-171274 ' value='692667'   \/><label for='answer-id-692667' id='answer-label-692667' class=' answer'><span>21.7%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171274[]' id='answer-id-692668' class='answer   answerof-171274 ' value='692668'   \/><label for='answer-id-692668' id='answer-label-692668' class=' answer'><span>30.0%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171274[]' id='answer-id-692669' class='answer   answerof-171274 ' value='692669'   \/><label for='answer-id-692669' id='answer-label-692669' class=' answer'><span>27.5%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171274[]' id='answer-id-692670' class='answer   answerof-171274 ' value='692670'   \/><label for='answer-id-692670' id='answer-label-692670' class=' answer'><span>22.5%<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-50' style=';'><div id='questionWrap-50'  class='   watupro-question-id-171275'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>50. <\/span>A company has accumulated a significant amount of excess cash which is not required for investment for the foreseeable future. <br \/>\r<br>It is currently on deposit, earning negligible returns. <br \/>\r<br>The Board of Directors is considering returning this excess cash to shareholders using a share repurchase programme. <br \/>\r<br>The majority of shareholders are individuals with small shareholdings. <br \/>\r<br>Which THREE of the following are advantages of the company undertaking a share repurchase programme?<\/div><input type='hidden' name='question_id[]' id='qID_50' value='171275' \/><input type='hidden' id='answerType171275' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171275[]' id='answer-id-692671' class='answer   answerof-171275 ' value='692671'   \/><label for='answer-id-692671' id='answer-label-692671' class=' answer'><span>Individual shareholders can realise their investment if they wish.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171275[]' id='answer-id-692672' class='answer   answerof-171275 ' value='692672'   \/><label for='answer-id-692672' id='answer-label-692672' class=' answer'><span>The earnings per share should increase for the shareholders who do not sell their shares.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171275[]' id='answer-id-692673' class='answer   answerof-171275 ' value='692673'   \/><label for='answer-id-692673' id='answer-label-692673' class=' answer'><span>It reduces excess cash which might have been attractive to predators.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171275[]' id='answer-id-692674' class='answer   answerof-171275 ' value='692674'   \/><label for='answer-id-692674' id='answer-label-692674' class=' answer'><span>It reduces the amount of cash for potential future investment opportunities.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171275[]' id='answer-id-692675' class='answer   answerof-171275 ' value='692675'   \/><label for='answer-id-692675' id='answer-label-692675' class=' answer'><span>Institutional investors generally prefer a constant predictable income in the form of dividends.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-51' style=';'><div id='questionWrap-51'  class='   watupro-question-id-171276'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>51. <\/span>A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios. <br \/>\r<br>The following data currently applies: <br \/>\r<br>&#8226; Profit before interest and tax for the current year is $500,000 <br \/>\r<br>&#8226; Long term debt of $300,000 at a fixed interest rate of 5% <br \/>\r<br>&#8226; 250,000 shares in issue with a share price of $8 <br \/>\r<br>The company plans to borrow an additional $200,000 on the first day of the year to invest in new project which will improve annual profit before interest and tax by $24,000. <br \/>\r<br>The additional debt would carry an interest rate of 3%. <br \/>\r<br>Assume the number of shares in issue remain constant but the share price will increase to $8.50 after the investment. <br \/>\r<br>The rate of corporate income tax is 30%. <br \/>\r<br>After the investment, which of the following statements is correct?<\/div><input type='hidden' name='question_id[]' id='qID_51' value='171276' \/><input type='hidden' id='answerType171276' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171276[]' id='answer-id-692676' class='answer   answerof-171276 ' value='692676'   \/><label for='answer-id-692676' id='answer-label-692676' class=' answer'><span>Interest cover will fall; P\/E ratio will fall.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171276[]' id='answer-id-692677' class='answer   answerof-171276 ' value='692677'   \/><label for='answer-id-692677' id='answer-label-692677' class=' answer'><span>Interest cover will fall; P\/E ratio will rise.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171276[]' id='answer-id-692678' class='answer   answerof-171276 ' value='692678'   \/><label for='answer-id-692678' id='answer-label-692678' class=' answer'><span>Interest cover will rise; P\/E ratio will rise.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171276[]' id='answer-id-692679' class='answer   answerof-171276 ' value='692679'   \/><label for='answer-id-692679' id='answer-label-692679' class=' answer'><span>Interest cover will rise; P\/E ratio will fall.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-52' style=';'><div id='questionWrap-52'  class='   watupro-question-id-171277'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>52. <\/span>A company is valuing its equity prior to an initial public offering (IPO). <br \/>\r<br>Relevant data: <br \/>\r<br>&#8226; Earnings per share $1.00 <br \/>\r<br>&#8226; WACC is 8% and the cost of equity is 12% <br \/>\r<br>&#8226; Dividend payout ratio 40% <br \/>\r<br>&#8226; Dividend growth rate 2% in perpetuity <br \/>\r<br>The current share price using the Dividend Valuation Model is closest to:<\/div><input type='hidden' name='question_id[]' id='qID_52' value='171277' \/><input type='hidden' id='answerType171277' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171277[]' id='answer-id-692680' class='answer   answerof-171277 ' value='692680'   \/><label for='answer-id-692680' id='answer-label-692680' class=' answer'><span>$4.08<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171277[]' id='answer-id-692681' class='answer   answerof-171277 ' value='692681'   \/><label for='answer-id-692681' id='answer-label-692681' class=' answer'><span>$6.12<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171277[]' id='answer-id-692682' class='answer   answerof-171277 ' value='692682'   \/><label for='answer-id-692682' id='answer-label-692682' class=' answer'><span>$6.80<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171277[]' id='answer-id-692683' class='answer   answerof-171277 ' value='692683'   \/><label for='answer-id-692683' id='answer-label-692683' class=' answer'><span>$4.00<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-53' style=';'><div id='questionWrap-53'  class='   watupro-question-id-171278'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>53. <\/span>A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months. <br \/>\r<br>It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings. The company already has a commercial paper programme in place and has a good relationship with its bank. <br \/>\r<br>Which of the following is likely to be the most cost effective method of borrowing the money?<\/div><input type='hidden' name='question_id[]' id='qID_53' value='171278' \/><input type='hidden' id='answerType171278' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171278[]' id='answer-id-692684' class='answer   answerof-171278 ' value='692684'   \/><label for='answer-id-692684' id='answer-label-692684' class=' answer'><span>Bank overdraft<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171278[]' id='answer-id-692685' class='answer   answerof-171278 ' value='692685'   \/><label for='answer-id-692685' id='answer-label-692685' class=' answer'><span>6 month term loan<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171278[]' id='answer-id-692686' class='answer   answerof-171278 ' value='692686'   \/><label for='answer-id-692686' id='answer-label-692686' class=' answer'><span>Treasury Bills<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171278[]' id='answer-id-692687' class='answer   answerof-171278 ' value='692687'   \/><label for='answer-id-692687' id='answer-label-692687' class=' answer'><span>Commercial paper<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-54' style=';'><div id='questionWrap-54'  class='   watupro-question-id-171279'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>54. <\/span>A company needs to raise $20 million to finance a project. <br \/>\r<br>It has decided on a rights issue at a discount of 20% to its current market share price. <br \/>\r<br>There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per share. <br \/>\r<br>Calculate the terms of the rights issue.<\/div><input type='hidden' name='question_id[]' id='qID_54' value='171279' \/><input type='hidden' id='answerType171279' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171279[]' id='answer-id-692688' class='answer   answerof-171279 ' value='692688'   \/><label for='answer-id-692688' id='answer-label-692688' class=' answer'><span>1 new share for every 4 existing shares<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171279[]' id='answer-id-692689' class='answer   answerof-171279 ' value='692689'   \/><label for='answer-id-692689' id='answer-label-692689' class=' answer'><span>1 new share for every 20 existing shares<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171279[]' id='answer-id-692690' class='answer   answerof-171279 ' value='692690'   \/><label for='answer-id-692690' id='answer-label-692690' class=' answer'><span>1 new share for every 5 existing shares<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171279[]' id='answer-id-692691' class='answer   answerof-171279 ' value='692691'   \/><label for='answer-id-692691' id='answer-label-692691' class=' answer'><span>1 new share for every 25 existing shares<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-55' style=';'><div id='questionWrap-55'  class='   watupro-question-id-171280'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>55. <\/span>A company's current earnings before interest and taxation are $5 million. <br \/>\r<br>These are expected to remain constant for the forseeable future. <br \/>\r<br>The company has 10 million shares in issue which currently trade at $3.60. <br \/>\r<br>It also has a $10 million long term floating rate loan. <br \/>\r<br>The current interest rate on this loan is 5%. <br \/>\r<br>The company pays tax at 20%. <br \/>\r<br>The company expects interest rates to increase next year to 6% and it's Price\/Earnings (P\/E) ratio to move to 9.5 times by the end of next year. <br \/>\r<br>What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P\/E movement both occur?<\/div><input type='hidden' name='question_id[]' id='qID_55' value='171280' \/><input type='hidden' id='answerType171280' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171280[]' id='answer-id-692692' class='answer   answerof-171280 ' value='692692'   \/><label for='answer-id-692692' id='answer-label-692692' class=' answer'><span>Reduction of 7%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171280[]' id='answer-id-692693' class='answer   answerof-171280 ' value='692693'   \/><label for='answer-id-692693' id='answer-label-692693' class=' answer'><span>Reduction of 5%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171280[]' id='answer-id-692694' class='answer   answerof-171280 ' value='692694'   \/><label for='answer-id-692694' id='answer-label-692694' class=' answer'><span>Reduction of 1%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171280[]' id='answer-id-692695' class='answer   answerof-171280 ' value='692695'   \/><label for='answer-id-692695' id='answer-label-692695' class=' answer'><span>Reduction of 0%<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-56' style=';'><div id='questionWrap-56'  class='   watupro-question-id-171281'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>56. <\/span>Listed company R is in the process of making a cash offer for the equity of unlisted company S. <br \/>\r<br>Company R has a market capitalisation of $200 million and a price\/earnings ratio of 10. <br \/>\r<br>Company S has a market capitalisation of $50 million and earnings of $7 million. <br \/>\r<br>Company R intends to offer $60 million and expects to be able to realise synergistic benefits of $20 million by combining the two businesses. This estimate excludes the estimated $8 million cost of integrating the two businesses. <br \/>\r<br>Which of the following figures need to be used when calculating the value of the combined entity in $ millions?<\/div><input type='hidden' name='question_id[]' id='qID_56' value='171281' \/><input type='hidden' id='answerType171281' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171281[]' id='answer-id-692696' class='answer   answerof-171281 ' value='692696'   \/><label for='answer-id-692696' id='answer-label-692696' class=' answer'><span>8, 20, 50, 60, 200<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171281[]' id='answer-id-692697' class='answer   answerof-171281 ' value='692697'   \/><label for='answer-id-692697' id='answer-label-692697' class=' answer'><span>8, 20, 50, 200<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171281[]' id='answer-id-692698' class='answer   answerof-171281 ' value='692698'   \/><label for='answer-id-692698' id='answer-label-692698' class=' answer'><span>20, 50, 60, 200<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171281[]' id='answer-id-692699' class='answer   answerof-171281 ' value='692699'   \/><label for='answer-id-692699' id='answer-label-692699' class=' answer'><span>7, 10, 20, 50, 200<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-57' style=';'><div id='questionWrap-57'  class='   watupro-question-id-171282'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>57. <\/span>If a company's bonds are currently yielding 8% in the marketplace, why would the entity's cost of debt be lower than this?<\/div><input type='hidden' name='question_id[]' id='qID_57' value='171282' \/><input type='hidden' id='answerType171282' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171282[]' id='answer-id-692700' class='answer   answerof-171282 ' value='692700'   \/><label for='answer-id-692700' id='answer-label-692700' class=' answer'><span>There should be no difference; the cost of debt is the same as the bond's market yield.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171282[]' id='answer-id-692701' class='answer   answerof-171282 ' value='692701'   \/><label for='answer-id-692701' id='answer-label-692701' class=' answer'><span>Interest is deductible for tax purposes.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171282[]' id='answer-id-692702' class='answer   answerof-171282 ' value='692702'   \/><label for='answer-id-692702' id='answer-label-692702' class=' answer'><span>The company's credit rating has changed.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171282[]' id='answer-id-692703' class='answer   answerof-171282 ' value='692703'   \/><label for='answer-id-692703' id='answer-label-692703' class=' answer'><span>Market interest rates have decreased.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-58' style=';'><div id='questionWrap-58'  class='   watupro-question-id-171283'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>58. <\/span>A company is owned by its five directors who want to sell the business. <br \/>\r<br>Current profit after tax is $750,000. <br \/>\r<br>The directors are currently paid minimal salaries, taking most of their incomes as dividends. <br \/>\r<br>After the company is sold, directors' salaries will need to be increased by $50,000 each year in total. <br \/>\r<br>A suitable Price\/Earnings (P\/E) ratio is 7, and the rate of corporate tax is 20%. <br \/>\r<br>What is the value of the company using a P\/E valuation?<\/div><input type='hidden' name='question_id[]' id='qID_58' value='171283' \/><input type='hidden' id='answerType171283' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171283[]' id='answer-id-692704' class='answer   answerof-171283 ' value='692704'   \/><label for='answer-id-692704' id='answer-label-692704' class=' answer'><span>$4,900,000<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171283[]' id='answer-id-692705' class='answer   answerof-171283 ' value='692705'   \/><label for='answer-id-692705' id='answer-label-692705' class=' answer'><span>$5,250,000<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171283[]' id='answer-id-692706' class='answer   answerof-171283 ' value='692706'   \/><label for='answer-id-692706' id='answer-label-692706' class=' answer'><span>$5,530,000<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171283[]' id='answer-id-692707' class='answer   answerof-171283 ' value='692707'   \/><label for='answer-id-692707' id='answer-label-692707' class=' answer'><span>$4,970,000<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-59' style=';'><div id='questionWrap-59'  class='   watupro-question-id-171284'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>59. <\/span>Company A plans to acquire a minority stake in Company B. <br \/>\r<br>The last available share price for Company B was $0.60. <br \/>\r<br>Relevant data about Company B is as follows: <br \/>\r<br>&#8226; A dividend per share of $0.08 has just been paid <br \/>\r<br>&#8226; Dividend growth is expected to be 2% <br \/>\r<br>&#8226; Earnings growth is expected to be 4% <br \/>\r<br>&#8226; The cost of equity is 15% <br \/>\r<br>&#8226; The weighted average cost of capital is 13% <br \/>\r<br>Using the dividend growth model, what would be the expected change in share price?<\/div><input type='hidden' name='question_id[]' id='qID_59' value='171284' \/><input type='hidden' id='answerType171284' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171284[]' id='answer-id-692708' class='answer   answerof-171284 ' value='692708'   \/><label for='answer-id-692708' id='answer-label-692708' class=' answer'><span>$0.03 increase<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171284[]' id='answer-id-692709' class='answer   answerof-171284 ' value='692709'   \/><label for='answer-id-692709' id='answer-label-692709' class=' answer'><span>$0.07 fall<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171284[]' id='answer-id-692710' class='answer   answerof-171284 ' value='692710'   \/><label for='answer-id-692710' id='answer-label-692710' class=' answer'><span>$0.16 increase<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171284[]' id='answer-id-692711' class='answer   answerof-171284 ' value='692711'   \/><label for='answer-id-692711' id='answer-label-692711' class=' answer'><span>$0.14 increase<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-60' style=';'><div id='questionWrap-60'  class='   watupro-question-id-171285'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>60. <\/span>Which THREE of the following non-financial objectives would be most appropriate for a listed company in the food retailing industry?<\/div><input type='hidden' name='question_id[]' id='qID_60' value='171285' \/><input type='hidden' id='answerType171285' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171285[]' id='answer-id-692712' class='answer   answerof-171285 ' value='692712'   \/><label for='answer-id-692712' id='answer-label-692712' class=' answer'><span>Reduce customer complaints<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171285[]' id='answer-id-692713' class='answer   answerof-171285 ' value='692713'   \/><label for='answer-id-692713' id='answer-label-692713' class=' answer'><span>Increase customer service quality<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171285[]' id='answer-id-692714' class='answer   answerof-171285 ' value='692714'   \/><label for='answer-id-692714' id='answer-label-692714' class=' answer'><span>Reduce production time<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171285[]' id='answer-id-692715' class='answer   answerof-171285 ' value='692715'   \/><label for='answer-id-692715' id='answer-label-692715' class=' answer'><span>Improve staff morale<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171285[]' id='answer-id-692716' class='answer   answerof-171285 ' value='692716'   \/><label for='answer-id-692716' id='answer-label-692716' class=' answer'><span>Reduce raw material wastage<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-61' style=';'><div id='questionWrap-61'  class='   watupro-question-id-171286'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>61. <\/span>A company has in a 5% corporate bond in issue on which there are two loan covenants. <br \/>\r<br>&#8226; Interest cover must not fall below 3 times <br \/>\r<br>&#8226; Retained earnings for the year must not fall below $3.5 million The Company has 200 million shares in issue. <br \/>\r<br>The most recent dividend per share was $0.04. <br \/>\r<br>The Company intends increasing dividends by 10% next year. <br \/>\r<br>Financial projections for next year are as follows: <br \/>\r<br>Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?<\/div><input type='hidden' name='question_id[]' id='qID_61' value='171286' \/><input type='hidden' id='answerType171286' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171286[]' id='answer-id-692717' class='answer   answerof-171286 ' value='692717'   \/><label for='answer-id-692717' id='answer-label-692717' class=' answer'><span>The company will be in compliance with both covenants.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171286[]' id='answer-id-692718' class='answer   answerof-171286 ' value='692718'   \/><label for='answer-id-692718' id='answer-label-692718' class=' answer'><span>The company will be in breach of both covenants.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171286[]' id='answer-id-692719' class='answer   answerof-171286 ' value='692719'   \/><label for='answer-id-692719' id='answer-label-692719' class=' answer'><span>The company will breach the covenant in respect of retained earnings only.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171286[]' id='answer-id-692720' class='answer   answerof-171286 ' value='692720'   \/><label for='answer-id-692720' id='answer-label-692720' class=' answer'><span>The company will be in breach of the covenant in respect of interest cover only.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-62' style=';'><div id='questionWrap-62'  class='   watupro-question-id-171287'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>62. <\/span>The Board of Directors of a listed company wish to estimate a reasonable valuation of the <br \/>\r<br>entire share capital of the company in the event of a takeover bid. <br \/>\r<br>The company's current profit before taxation is $4.0 million. <br \/>\r<br>The rate of corporate tax is 25%. <br \/>\r<br>The average P\/E multiple of listed companies in the same industry is 8 times current earnings. <br \/>\r<br>The P\/E multiple of recent takeovers in the same industry have ranged from 9 times to 10 times current earnings. <br \/>\r<br>The average P\/E multiple of the top 100 companies on the stock market is 15 times current earnings. <br \/>\r<br>Advise the Board of Directors which of the following is a reasonable estimate of a range of values of the entire share capital in the event of a bid being made for the whole company?<\/div><input type='hidden' name='question_id[]' id='qID_62' value='171287' \/><input type='hidden' id='answerType171287' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171287[]' id='answer-id-692721' class='answer   answerof-171287 ' value='692721'   \/><label for='answer-id-692721' id='answer-label-692721' class=' answer'><span>Minimum = $36 million, and maximum = $40 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171287[]' id='answer-id-692722' class='answer   answerof-171287 ' value='692722'   \/><label for='answer-id-692722' id='answer-label-692722' class=' answer'><span>Minimum = $27 million, and maximum = $30 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171287[]' id='answer-id-692723' class='answer   answerof-171287 ' value='692723'   \/><label for='answer-id-692723' id='answer-label-692723' class=' answer'><span>Minimum = $32 million, and maximum = $60 million.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171287[]' id='answer-id-692724' class='answer   answerof-171287 ' value='692724'   \/><label for='answer-id-692724' id='answer-label-692724' class=' answer'><span>Minimum = $24 million, and maximum = $45 million.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-63' style=';'><div id='questionWrap-63'  class='   watupro-question-id-171288'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>63. <\/span>Company B is an all equity financed company with a cost of equity of 10%. <br \/>\r<br>It is considering issuing bonds in order to achieve a gearing level of 20% debt and 80% equity. <br \/>\r<br>These bonds will pay a coupon rate of 5% and have an interest yield of 6%. <br \/>\r<br>Company B pays corporate tax at the rate of 25%. <br \/>\r<br>According to Modigliani and Miller's theory of capital structure with tax, what will be Company B's new cost of equity? <br \/>\r<br>A) <br \/>\r<br><br><img decoding=\"async\" width=241 height=28 src=\"https:\/\/www.dumpsbase.com\/freedumps\/wp-content\/uploads\/2021\/03\/image002-47.jpg\" v:shapes=\"_x0000_i1025\"><br><br \/>\r<br>B) <br \/>\r<br><br><img decoding=\"async\" width=240 height=28 src=\"https:\/\/www.dumpsbase.com\/freedumps\/wp-content\/uploads\/2021\/03\/image004-42.jpg\" v:shapes=\"_x0000_i1026\"><br><br \/>\r<br>C) <br \/>\r<br><br><img decoding=\"async\" width=240 height=28 src=\"https:\/\/www.dumpsbase.com\/freedumps\/wp-content\/uploads\/2021\/03\/image006-37.jpg\" v:shapes=\"_x0000_i1027\"><br><br \/>\r<br>D) <br \/>\r<br><br><img decoding=\"async\" width=242 height=28 src=\"https:\/\/www.dumpsbase.com\/freedumps\/wp-content\/uploads\/2021\/03\/image008-36.jpg\" v:shapes=\"_x0000_i1028\"><br><\/div><input type='hidden' name='question_id[]' id='qID_63' value='171288' \/><input type='hidden' id='answerType171288' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171288[]' id='answer-id-692725' class='answer   answerof-171288 ' value='692725'   \/><label for='answer-id-692725' id='answer-label-692725' class=' answer'><span>Option A<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171288[]' id='answer-id-692726' class='answer   answerof-171288 ' value='692726'   \/><label for='answer-id-692726' id='answer-label-692726' class=' answer'><span>Option B<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171288[]' id='answer-id-692727' class='answer   answerof-171288 ' value='692727'   \/><label for='answer-id-692727' id='answer-label-692727' class=' answer'><span>Option C<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171288[]' id='answer-id-692728' class='answer   answerof-171288 ' value='692728'   \/><label for='answer-id-692728' id='answer-label-692728' class=' answer'><span>Option D<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-64' style=';'><div id='questionWrap-64'  class='   watupro-question-id-171289'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>64. <\/span>A listed company in a high growth industry, where innovation is a key driver of success has always operated a residual dividend policy, resulting in volatility in dividends due to periodic significant investments in research and development. <br \/>\r<br>The company has recently come under pressure from some investors to change its dividend policy so that shareholders receive a consistent growing dividend. In addition, they suggested that the company should use more debt finance. <br \/>\r<br>If the suggested change is made to the financial policies, which THREE of the following statements are true?<\/div><input type='hidden' name='question_id[]' id='qID_64' value='171289' \/><input type='hidden' id='answerType171289' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171289[]' id='answer-id-692729' class='answer   answerof-171289 ' value='692729'   \/><label for='answer-id-692729' id='answer-label-692729' class=' answer'><span>It may give a signal to the market that the company is entering a period of stable growth.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171289[]' id='answer-id-692730' class='answer   answerof-171289 ' value='692730'   \/><label for='answer-id-692730' id='answer-label-692730' class=' answer'><span>There may be a change to the shareholder profile due to 'the clientele effect'.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171289[]' id='answer-id-692731' class='answer   answerof-171289 ' value='692731'   \/><label for='answer-id-692731' id='answer-label-692731' class=' answer'><span>The directors will not have to take shareholder dividend preferences into consideration in future.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171289[]' id='answer-id-692732' class='answer   answerof-171289 ' value='692732'   \/><label for='answer-id-692732' id='answer-label-692732' class=' answer'><span>Retained earnings have a lower cost than debt finance.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171289[]' id='answer-id-692733' class='answer   answerof-171289 ' value='692733'   \/><label for='answer-id-692733' id='answer-label-692733' class=' answer'><span>The company's financial risk will increase due to its increased use of debt finance.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-65' style=';'><div id='questionWrap-65'  class='   watupro-question-id-171290'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>65. <\/span>A company has in a 5% corporate bond in issue on which there are two loan covenants. <br \/>\r<br>&#8226; Interest cover must not fall below 3 times <br \/>\r<br>&#8226; Retained earnings for the year must not fall below $3.5 million <br \/>\r<br>The Company has 200 million shares in issue. <br \/>\r<br>The most recent dividend per share was $0.04. <br \/>\r<br>The Company intends increasing dividends by 10% next year. <br \/>\r<br>Financial projections for next year are as follows: <br \/>\r<br>Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?<\/div><input type='hidden' name='question_id[]' id='qID_65' value='171290' \/><input type='hidden' id='answerType171290' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171290[]' id='answer-id-692734' class='answer   answerof-171290 ' value='692734'   \/><label for='answer-id-692734' id='answer-label-692734' class=' answer'><span>The company will be in compliance with both covenants.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171290[]' id='answer-id-692735' class='answer   answerof-171290 ' value='692735'   \/><label for='answer-id-692735' id='answer-label-692735' class=' answer'><span>The company will be in breach of both covenants.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171290[]' id='answer-id-692736' class='answer   answerof-171290 ' value='692736'   \/><label for='answer-id-692736' id='answer-label-692736' class=' answer'><span>The company will breach the covenant in respect of retained earnings only.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171290[]' id='answer-id-692737' class='answer   answerof-171290 ' value='692737'   \/><label for='answer-id-692737' id='answer-label-692737' class=' answer'><span>The company will be in breach of the covenant in respect of interest cover only.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-66' style=';'><div id='questionWrap-66'  class='   watupro-question-id-171291'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>66. <\/span>A company needs to raise $20 million to finance a project. <br \/>\r<br>It has decided on a rights issue at a discount of 20% to its current market share price. <br \/>\r<br>There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per share. <br \/>\r<br>Calculate the terms of the rights issue.<\/div><input type='hidden' name='question_id[]' id='qID_66' value='171291' \/><input type='hidden' id='answerType171291' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171291[]' id='answer-id-692738' class='answer   answerof-171291 ' value='692738'   \/><label for='answer-id-692738' id='answer-label-692738' class=' answer'><span>1 new share for every 4 existing shares<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171291[]' id='answer-id-692739' class='answer   answerof-171291 ' value='692739'   \/><label for='answer-id-692739' id='answer-label-692739' class=' answer'><span>1 new share for every 20 existing shares<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171291[]' id='answer-id-692740' class='answer   answerof-171291 ' value='692740'   \/><label for='answer-id-692740' id='answer-label-692740' class=' answer'><span>1 new share for every 5 existing shares<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171291[]' id='answer-id-692741' class='answer   answerof-171291 ' value='692741'   \/><label for='answer-id-692741' id='answer-label-692741' class=' answer'><span>1 new share for every 25 existing shares<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-67' style=';'><div id='questionWrap-67'  class='   watupro-question-id-171292'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>67. <\/span>Two listed companies in the same industry are joining together through a merger. <br \/>\r<br>What are the likely outcomes that will occur after the merger has happened? Select ALL that apply.<\/div><input type='hidden' name='question_id[]' id='qID_67' value='171292' \/><input type='hidden' id='answerType171292' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171292[]' id='answer-id-692742' class='answer   answerof-171292 ' value='692742'   \/><label for='answer-id-692742' id='answer-label-692742' class=' answer'><span>Increase in customer base.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171292[]' id='answer-id-692743' class='answer   answerof-171292 ' value='692743'   \/><label for='answer-id-692743' id='answer-label-692743' class=' answer'><span>Competition authorities step in to stop a potential price monopoly.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171292[]' id='answer-id-692744' class='answer   answerof-171292 ' value='692744'   \/><label for='answer-id-692744' id='answer-label-692744' class=' answer'><span>Decrease in employee motivation due to internal changes.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171292[]' id='answer-id-692745' class='answer   answerof-171292 ' value='692745'   \/><label for='answer-id-692745' id='answer-label-692745' class=' answer'><span>Changes to supplier relationships owing to internal changes.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171292[]' id='answer-id-692746' class='answer   answerof-171292 ' value='692746'   \/><label for='answer-id-692746' id='answer-label-692746' class=' answer'><span>Cost savings from synergistic benefits and economies of scale.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-68' style=';'><div id='questionWrap-68'  class='   watupro-question-id-171293'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>68. <\/span>Company M is a listed company in a highly technical service industry. <br \/>\r<br>The directors are considering making a cash offer for the shares in Company Q, an unquoted company in the same industry. <br \/>\r<br>Relevant data about Company Q: <br \/>\r<br>&#8226; The company has seen consistent growth in earnings each year since it was founded 10 years ago. <br \/>\r<br>&#8226; It has relatively few non-current assets. <br \/>\r<br>&#8226; Many of the employees are leading experts in their field. <br \/>\r<br>A recent exercise suggested that the value of the company's human capital exceeded the value of its tangible assets. <br \/>\r<br>The directors and major shareholders of Company Q have indicated willingness to sell the company. <br \/>\r<br>Before negotiations become too advanced, the directors of Company M are considering the benefits to their company that would follow the acquisition. <br \/>\r<br>Which THREE of the following are the most likely benefits of the acquisition to Company M's shareholders?<\/div><input type='hidden' name='question_id[]' id='qID_68' value='171293' \/><input type='hidden' id='answerType171293' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171293[]' id='answer-id-692747' class='answer   answerof-171293 ' value='692747'   \/><label for='answer-id-692747' id='answer-label-692747' class=' answer'><span>Access to technical expertise.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171293[]' id='answer-id-692748' class='answer   answerof-171293 ' value='692748'   \/><label for='answer-id-692748' id='answer-label-692748' class=' answer'><span>Reduction of risk through diversification.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171293[]' id='answer-id-692749' class='answer   answerof-171293 ' value='692749'   \/><label for='answer-id-692749' id='answer-label-692749' class=' answer'><span>Improved asset backing for borrowing due to the acquisition of intangible assets.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171293[]' id='answer-id-692750' class='answer   answerof-171293 ' value='692750'   \/><label for='answer-id-692750' id='answer-label-692750' class=' answer'><span>Gain economies of scale.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171293[]' id='answer-id-692751' class='answer   answerof-171293 ' value='692751'   \/><label for='answer-id-692751' id='answer-label-692751' class=' answer'><span>Improve earnings per share (EPS).<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-69' style=';'><div id='questionWrap-69'  class='   watupro-question-id-171294'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>69. <\/span>Company A is proposing a rights issue to finance a new investment. Its current debt to equity ratio is 10%. <br \/>\r<br>Which TWO of the following statements are true?<\/div><input type='hidden' name='question_id[]' id='qID_69' value='171294' \/><input type='hidden' id='answerType171294' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171294[]' id='answer-id-692752' class='answer   answerof-171294 ' value='692752'   \/><label for='answer-id-692752' id='answer-label-692752' class=' answer'><span>The issue price has to be at least 20% below the pre-rights share price.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171294[]' id='answer-id-692753' class='answer   answerof-171294 ' value='692753'   \/><label for='answer-id-692753' id='answer-label-692753' class=' answer'><span>The issue price of new shares should be set to guarantee the full take up of shares offered.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171294[]' id='answer-id-692754' class='answer   answerof-171294 ' value='692754'   \/><label for='answer-id-692754' id='answer-label-692754' class=' answer'><span>The actual ex-rights price may be higher than the theoretical ex-rights price due to the value created from the project.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171294[]' id='answer-id-692755' class='answer   answerof-171294 ' value='692755'   \/><label for='answer-id-692755' id='answer-label-692755' class=' answer'><span>Company A's current low gearing ratio may require a rights issue rather than a debt issue to finance the new project.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171294[]' id='answer-id-692756' class='answer   answerof-171294 ' value='692756'   \/><label for='answer-id-692756' id='answer-label-692756' class=' answer'><span>According to Modigliani and Miller's Theory of Capital Structure with tax, the rights issue will result in a lower cost of equity for Company<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-70' style=';'><div id='questionWrap-70'  class='   watupro-question-id-171295'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>70. <\/span>Which of the following explains an aim of integrated reporting in accordance <br \/>\r<br>with The International &lt;IR&gt; Framework as issued by the International Integrated Reporting Council?<\/div><input type='hidden' name='question_id[]' id='qID_70' value='171295' \/><input type='hidden' id='answerType171295' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171295[]' id='answer-id-692757' class='answer   answerof-171295 ' value='692757'   \/><label for='answer-id-692757' id='answer-label-692757' class=' answer'><span>To highlight the need for greater reporting of performance to stakeholders in a greater level of detail than at present.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171295[]' id='answer-id-692758' class='answer   answerof-171295 ' value='692758'   \/><label for='answer-id-692758' id='answer-label-692758' class=' answer'><span>To support decision making and actions that focus on creating value over the short, medium and long term.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171295[]' id='answer-id-692759' class='answer   answerof-171295 ' value='692759'   \/><label for='answer-id-692759' id='answer-label-692759' class=' answer'><span>To integrate the various accepted accounting practices of member bodies into a single, unified code of accounting principles.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171295[]' id='answer-id-692760' class='answer   answerof-171295 ' value='692760'   \/><label for='answer-id-692760' id='answer-label-692760' class=' answer'><span>To highlight the separation of strategy, governance and financial performance in a social, environmental and economic context.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-71' style=';'><div id='questionWrap-71'  class='   watupro-question-id-171296'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>71. <\/span>A company has some 7% coupon bonds in issue and wishes to change its interest rate profile. <br \/>\r<br>It has decided to do this by entering into a plain coupon interest rate swap with it's bank. <br \/>\r<br>The bank has quoted a swap rate of: 6.0% - 6.5% fixed against LIBOR. <br \/>\r<br>What will the company's new interest rate profile be?<\/div><input type='hidden' name='question_id[]' id='qID_71' value='171296' \/><input type='hidden' id='answerType171296' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171296[]' id='answer-id-692761' class='answer   answerof-171296 ' value='692761'   \/><label for='answer-id-692761' id='answer-label-692761' class=' answer'><span>VARIABLE at LIBOR<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171296[]' id='answer-id-692762' class='answer   answerof-171296 ' value='692762'   \/><label for='answer-id-692762' id='answer-label-692762' class=' answer'><span>VARIABLE at LIBOR + 0.5%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171296[]' id='answer-id-692763' class='answer   answerof-171296 ' value='692763'   \/><label for='answer-id-692763' id='answer-label-692763' class=' answer'><span>VARIABLE at LIBOR + 1.0%<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171296[]' id='answer-id-692764' class='answer   answerof-171296 ' value='692764'   \/><label for='answer-id-692764' id='answer-label-692764' class=' answer'><span>FIXED at 6.5%<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-72' style=';'><div id='questionWrap-72'  class='   watupro-question-id-171297'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>72. <\/span>A company plans a four-year project which will be financed by either an operating lease or a bank loan. <br \/>\r<br>Lease details: <br \/>\r<br>&#8226; Four year lease contract. <br \/>\r<br>&#8226; Annual lease rentals of $45,000, paid in advance on the 1st day of the year. Other information: <br \/>\r<br>&#8226; The interest rate payable on the bank borrowing is 10%. <br \/>\r<br>&#8226; The capital cost of the project is $200,000 which would have to be paid at the beginning of the first year. <br \/>\r<br>&#8226; A salvage or residual value of $100,000 is estimated at the end of the project's life. <br \/>\r<br>&#8226; Purchased assets attract straight line tax depreciation allowances. <br \/>\r<br>&#8226; Corporate income tax is 20% and is payable at the end of the year following the year to which it relates. <br \/>\r<br>A lease-or-buy appraisal is shown below: <br \/>\r<br>Which THREE of the following items are errors within the appraisal?<\/div><input type='hidden' name='question_id[]' id='qID_72' value='171297' \/><input type='hidden' id='answerType171297' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171297[]' id='answer-id-692765' class='answer   answerof-171297 ' value='692765'   \/><label for='answer-id-692765' id='answer-label-692765' class=' answer'><span>Lease payments are timed incorrectly<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171297[]' id='answer-id-692766' class='answer   answerof-171297 ' value='692766'   \/><label for='answer-id-692766' id='answer-label-692766' class=' answer'><span>Tax relief on lease payments have not been lagged correctly<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171297[]' id='answer-id-692767' class='answer   answerof-171297 ' value='692767'   \/><label for='answer-id-692767' id='answer-label-692767' class=' answer'><span>Using the 10% discount rate is incorrect<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171297[]' id='answer-id-692768' class='answer   answerof-171297 ' value='692768'   \/><label for='answer-id-692768' id='answer-label-692768' class=' answer'><span>The project's operating cashflows should be included<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171297[]' id='answer-id-692769' class='answer   answerof-171297 ' value='692769'   \/><label for='answer-id-692769' id='answer-label-692769' class=' answer'><span>The bank loan repayments should be included<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171297[]' id='answer-id-692770' class='answer   answerof-171297 ' value='692770'   \/><label for='answer-id-692770' id='answer-label-692770' class=' answer'><span>The salvage value has been included within the lease option<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-73' style=';'><div id='questionWrap-73'  class='   watupro-question-id-171298'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>73. <\/span>An unlisted company is attempting to value its equity using the dividend valuation model. <br \/>\r<br>Relevant information is as follows: <br \/>\r<br>&#8226; A dividend of $500,000 has just been paid. <br \/>\r<br>&#8226; Dividend growth of 8% is expected for the foreseeable future. <br \/>\r<br>&#8226; Earnings growth of 6% is expected for the foreseeable future. <br \/>\r<br>&#8226; The cost of equity of a proxy listed company is 15%. <br \/>\r<br>&#8226; The risk premium required due to the company being unlisted is 3%. <br \/>\r<br>The calculation that has been performed is as follows: <br \/>\r<br>Equity value = $540,000 \/ (0.18 - 0.08) = $5,400,000 <br \/>\r<br>What is the fault with the calculation that has been performed?<\/div><input type='hidden' name='question_id[]' id='qID_73' value='171298' \/><input type='hidden' id='answerType171298' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171298[]' id='answer-id-692771' class='answer   answerof-171298 ' value='692771'   \/><label for='answer-id-692771' id='answer-label-692771' class=' answer'><span>The cost of equity used in the calculation should have been 12% (15% subtract 3%).<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171298[]' id='answer-id-692772' class='answer   answerof-171298 ' value='692772'   \/><label for='answer-id-692772' id='answer-label-692772' class=' answer'><span>The dividend cashflow used should have been $500,000 rather than $540,000.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171298[]' id='answer-id-692773' class='answer   answerof-171298 ' value='692773'   \/><label for='answer-id-692773' id='answer-label-692773' class=' answer'><span>The dividend growth rate is unsuitable given that earning growth is lower than dividend growth.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171298[]' id='answer-id-692774' class='answer   answerof-171298 ' value='692774'   \/><label for='answer-id-692774' id='answer-label-692774' class=' answer'><span>The cost of equity used in the calculation should have been 15%; no adjustment was necessary.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-74' style=';'><div id='questionWrap-74'  class='   watupro-question-id-171299'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>74. <\/span>A company is considering the issue of a convertible bond compared to a straight bond issue (non-convertible bond). <br \/>\r<br>Director A is concerned that issuing a convertible bond will upset the shareholders for the following reasons: <br \/>\r<br>&#8226; it will dilute their control <br \/>\r<br>&#8226; the interest payments will be higher therefore reducing liquidity <br \/>\r<br>&#8226; it will increase the gearing ratio therefore increasing financial risk <br \/>\r<br>Director B disagrees, and is preparing a board paper to promote the issue of the convertible bond rather than a non-convertible. <br \/>\r<br>Advise the Director B which THREE of the following statements should be included in his board paper to promote the issue of the convertible bond?<\/div><input type='hidden' name='question_id[]' id='qID_74' value='171299' \/><input type='hidden' id='answerType171299' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171299[]' id='answer-id-692775' class='answer   answerof-171299 ' value='692775'   \/><label for='answer-id-692775' id='answer-label-692775' class=' answer'><span>The convertible bond may not dilute control as the bond holder has an option to choose \r\nconversion.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171299[]' id='answer-id-692776' class='answer   answerof-171299 ' value='692776'   \/><label for='answer-id-692776' id='answer-label-692776' class=' answer'><span>The coupon rate on the convertible bond will be lower than that on a non-convertible bond.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171299[]' id='answer-id-692777' class='answer   answerof-171299 ' value='692777'   \/><label for='answer-id-692777' id='answer-label-692777' class=' answer'><span>When converted into shares, the company will receive a cash inflow which can be used for future investments.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171299[]' id='answer-id-692778' class='answer   answerof-171299 ' value='692778'   \/><label for='answer-id-692778' id='answer-label-692778' class=' answer'><span>Issuing a convertible bond will have a more favourable impact on the gearing ratio than a non-convertible bond.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171299[]' id='answer-id-692779' class='answer   answerof-171299 ' value='692779'   \/><label for='answer-id-692779' id='answer-label-692779' class=' answer'><span>Over the life of the bond, a convertible will be more expensive than a non-convertible.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-75' style=';'><div id='questionWrap-75'  class='   watupro-question-id-171300'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>75. <\/span>A project requires an initial outlay of $2 million which can be financed with either a bank loan or finance lease. <br \/>\r<br>The company will be responsible for annual maintenance under either option. <br \/>\r<br>The tax regime is: <br \/>\r<br>&#8226; Tax depreciation allowances can be claimed on purchased assets. <br \/>\r<br>&#8226; If leased using a finance lease, tax relief can be claimed on the interest element of the lease payments and also on the accounting depreciation charge. <br \/>\r<br>The trainee management accountant has begun evaluating the lease versus buy decision and has produced the following data. He is not confident that all this information is relevant to this decision. <br \/>\r<br>Using only the relevant data, which of the following is correct?<\/div><input type='hidden' name='question_id[]' id='qID_75' value='171300' \/><input type='hidden' id='answerType171300' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171300[]' id='answer-id-692780' class='answer   answerof-171300 ' value='692780'   \/><label for='answer-id-692780' id='answer-label-692780' class=' answer'><span>The bank loan is $30,000 MORE expensive than the finance lease.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171300[]' id='answer-id-692781' class='answer   answerof-171300 ' value='692781'   \/><label for='answer-id-692781' id='answer-label-692781' class=' answer'><span>The bank loan is $20,000 LESS expensive than the finance lease.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171300[]' id='answer-id-692782' class='answer   answerof-171300 ' value='692782'   \/><label for='answer-id-692782' id='answer-label-692782' class=' answer'><span>The bank loan is $70,000 LESS expensive than the finance lease.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171300[]' id='answer-id-692783' class='answer   answerof-171300 ' value='692783'   \/><label for='answer-id-692783' id='answer-label-692783' class=' answer'><span>The bank loan is $120,000 LESS expensive than the finance lease.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-76' style=';'><div id='questionWrap-76'  class='   watupro-question-id-171301'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>76. <\/span>Company A plans to acquire Company B, an unlisted company which has been in business for 3 years. <br \/>\r<br>It has incurred losses in its first 3 years but is expected to become highly profitable in the near future. <br \/>\r<br>No listed companies in the country operate the same business field as Company B, a unique new high-risk business process. <br \/>\r<br>The future success of the process and hence the future growth rate in earnings and dividends is difficult to determine. <br \/>\r<br>Company A is assessing the validity of using the dividend growth method to value Company B. <br \/>\r<br>Which THREE of the following are weaknesses of using the dividend growth model to value an unlisted company such as Company B?<\/div><input type='hidden' name='question_id[]' id='qID_76' value='171301' \/><input type='hidden' id='answerType171301' value='checkbox'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171301[]' id='answer-id-692784' class='answer   answerof-171301 ' value='692784'   \/><label for='answer-id-692784' id='answer-label-692784' class=' answer'><span>The company has been unprofitable to date and hence, there is no established dividend payment pattern.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171301[]' id='answer-id-692785' class='answer   answerof-171301 ' value='692785'   \/><label for='answer-id-692785' id='answer-label-692785' class=' answer'><span>The future projected dividend stream is used as the basis for the valuation.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171301[]' id='answer-id-692786' class='answer   answerof-171301 ' value='692786'   \/><label for='answer-id-692786' id='answer-label-692786' class=' answer'><span>The future growth rate in earnings and dividends will be difficult to accurately determine.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171301[]' id='answer-id-692787' class='answer   answerof-171301 ' value='692787'   \/><label for='answer-id-692787' id='answer-label-692787' class=' answer'><span>The dividend growth model does not take the time value of money into consideration.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='checkbox' name='answer-171301[]' id='answer-id-692788' class='answer   answerof-171301 ' value='692788'   \/><label for='answer-id-692788' id='answer-label-692788' class=' answer'><span>The cost of capital will be difficult to estimate.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-77' style=';'><div id='questionWrap-77'  class='   watupro-question-id-171302'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>77. <\/span>CORRECT TEXT <br \/>\r<br>A company is planning to repurchase some of its shares. <br \/>\r<br>Relevant details are as follows: <br \/>\r<br>&#8226; 100 million shares in issue <br \/>\r<br>&#8226; Current share price $5 <br \/>\r<br>&#8226; 5 million shares to be repurchased <br \/>\r<br>&#8226; 10% repurchase premium <br \/>\r<br>&#8226; Repurchased shares to be cancelled <br \/>\r<br>What would you expect the share price after the repurchase to be? <br \/>\r<br>Give your answer to two decimal places. <br \/>\r<br>$ ?<\/div><input type='hidden' name='question_id[]' id='qID_77' value='171302' \/><input type='hidden' id='answerType171302' value='textarea'><!-- end question-content--><\/div><div class='question-choices '><p><textarea name='answer-171302[]' id='textarea_q_171302' class='watupro-textarea-medium' rows='5' cols='80'><\/textarea>\n<\/p><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-78' style=';'><div id='questionWrap-78'  class='   watupro-question-id-171303'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>78. <\/span>A listed company has recently announced a profit warning. <br \/>\r<br>The company's share price fell 20% on the day of the announcement but had been fairly static in the weeks leading up to the announcement. <br \/>\r<br>Which form of efficient market is most likely to be indicated by this share price movement?<\/div><input type='hidden' name='question_id[]' id='qID_78' value='171303' \/><input type='hidden' id='answerType171303' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171303[]' id='answer-id-692790' class='answer   answerof-171303 ' value='692790'   \/><label for='answer-id-692790' id='answer-label-692790' class=' answer'><span>Weak form<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171303[]' id='answer-id-692791' class='answer   answerof-171303 ' value='692791'   \/><label for='answer-id-692791' id='answer-label-692791' class=' answer'><span>Semi-strong form<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171303[]' id='answer-id-692792' class='answer   answerof-171303 ' value='692792'   \/><label for='answer-id-692792' id='answer-label-692792' class=' answer'><span>Strong form<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171303[]' id='answer-id-692793' class='answer   answerof-171303 ' value='692793'   \/><label for='answer-id-692793' id='answer-label-692793' class=' answer'><span>Random walk<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-79' style=';'><div id='questionWrap-79'  class='   watupro-question-id-171304'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>79. <\/span>A listed publishing company owns a subsidiary company whose business activity is training. <br \/>\r<br>It wishes to dispose of the subsidiary company. <br \/>\r<br>The following information is available: <br \/>\r<br>The board of the publishing company believe that the value of the subsidiary company, and hence the value of the equity invested in it, can be determined by calculating the present value of the subsidiary's free cashflows. <br \/>\r<br>Which of the following is the most appropriate discount rate to use when determining the enterprise value of the company?<\/div><input type='hidden' name='question_id[]' id='qID_79' value='171304' \/><input type='hidden' id='answerType171304' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171304[]' id='answer-id-692794' class='answer   answerof-171304 ' value='692794'   \/><label for='answer-id-692794' id='answer-label-692794' class=' answer'><span>A WACC that reflects the gearing of the publishing company and the asset beta of a listed company that provides training activities.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171304[]' id='answer-id-692795' class='answer   answerof-171304 ' value='692795'   \/><label for='answer-id-692795' id='answer-label-692795' class=' answer'><span>A cost of equity that reflects the asset beta of a listed company that provides training activities.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171304[]' id='answer-id-692796' class='answer   answerof-171304 ' value='692796'   \/><label for='answer-id-692796' id='answer-label-692796' class=' answer'><span>A WACC that reflects the gearing of the subsidiary company and the asset beta of a listed company that provides training activities.<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171304[]' id='answer-id-692797' class='answer   answerof-171304 ' value='692797'   \/><label for='answer-id-692797' id='answer-label-692797' class=' answer'><span>A WACC that the reflects the gearing of the publishing company and the equity beta factor of the publishing company.<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div class='watu-question ' id='question-80' style=';'><div id='questionWrap-80'  class='   watupro-question-id-171305'>\n\t\t\t<div class='question-content'><div><span class='watupro_num'>80. <\/span>A company has forecast the following results for the next financial year: <br \/>\r<br>The following is also relevant: <br \/>\r<br>&#8226; Profit after tax for the year can be assumed to be equivalent to free cash flow for the year. <br \/>\r<br>&#8226; Debt finance comprises a $10 million floating rate loan which currently carries <br \/>\r<br>an interest rate of 5%. <br \/>\r<br>&#8226; $400,000 investment in non-current assets is required to achieve required growth, all of which is to financed from next year's free cash flow. <br \/>\r<br>&#8226; The company plans to pay a dividend of $150,000 next year, financed from next year's free cash flow. <br \/>\r<br>The company is concerned that interest rates could rise next year to 6% which could then affect their investment plans. <br \/>\r<br>If interest rates were to rise to 6% and the company wishes to maintain its dividend <br \/>\r<br>amount, the planned investment expenditure will decrease by:<\/div><input type='hidden' name='question_id[]' id='qID_80' value='171305' \/><input type='hidden' id='answerType171305' value='radio'><!-- end question-content--><\/div><div class='question-choices watupro-choices-columns '><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171305[]' id='answer-id-692798' class='answer   answerof-171305 ' value='692798'   \/><label for='answer-id-692798' id='answer-label-692798' class=' answer'><span>$25,000<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171305[]' id='answer-id-692799' class='answer   answerof-171305 ' value='692799'   \/><label for='answer-id-692799' id='answer-label-692799' class=' answer'><span>$75,000<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171305[]' id='answer-id-692800' class='answer   answerof-171305 ' value='692800'   \/><label for='answer-id-692800' id='answer-label-692800' class=' answer'><span>$50,000<\/span><\/label><\/div><div class='watupro-question-choice  ' dir='auto' ><input type='radio' name='answer-171305[]' id='answer-id-692801' class='answer   answerof-171305 ' value='692801'   \/><label for='answer-id-692801' id='answer-label-692801' class=' answer'><span>$100,000<\/span><\/label><\/div><!-- end question-choices--><\/div><!-- end questionWrap--><\/div><\/div><div style='display:none' id='question-81'>\n\t<div class='question-content'>\n\t\t<img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.dumpsbase.com\/freedumps\/wp-content\/plugins\/watupro\/img\/loading.gif\" width=\"16\" height=\"16\" alt=\"Loading...\" title=\"Loading...\" \/>&nbsp;Loading...\t<\/div>\n<\/div>\n\n<br \/>\n\t\n\t\t\t<div class=\"watupro_buttons flex \" id=\"watuPROButtons5231\" >\n\t\t  <div id=\"prev-question\" style=\"display:none;\"><input type=\"button\" value=\"&lt; Previous\" onclick=\"WatuPRO.nextQuestion(event, 'previous');\"\/><\/div>\t\t  \t\t  \t\t   \n\t\t   \t  \t\t<div><input type=\"button\" name=\"action\" class=\"watupro-submit-button\" onclick=\"WatuPRO.submitResult(event)\" id=\"action-button\" value=\"View Results\"  \/>\n\t\t<\/div>\n\t\t<\/div>\n\t\t\n\t<input type=\"hidden\" 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