F3 Exam Dumps - Financial Strategy
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A company is considering a divestment via either a management buyout (MBO) or sale to a private equity purchaser. Which of the following is an argument in favour of the MBO from the viewpoint of the original company?
Company B is an all equity financed company with a cost of equity of 10%.
It is considering issuing bonds in order to achieve a gearing level of 20% debt and 80% equity.
These bonds will pay a coupon rate of 5%Â and have an interest yield of 6%.
Company B pays corporate tax at the rate of 25%.
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According to Modigliani and Miller's theory of capital structure with tax, what will be Company B's new cost of equity?
A)
B)
C)
D)
Option A
Option B
Option C
Option D
A company is based in Country Y whose functional currency is YS. It has an investment in Country Z whose functional currency is ZS This year the company expects to generate ZS20 million profit after tax.
Tax Regime
• Corporate income tax rate in Country Y is 60%
• Corporate income tax rate in Country Z Is 30%
• Full double tax relief is available
Assume an exchange rate of YS1 = ZS5
What is the expected profit after tax in YS if the ZS profit is remitted to Country Y?
A company has convertible bonds in issue.
The following debt is apply (31 December 20X0):
• Conversion ratio- 20 shares for each $130 bond.
• Current share price - $4 50
• Expected annual growth in share price - 5%
Advise the bond Holder at which date the convers on would be worthwhile?
A company has an opportunity to invest in a positive net present value project, but the project would require debt finance that would push the company's gearing ever a limit imposed by a debt covenant on an existing loan.
Which THREE of the following actions could be taken by the company?
JAG and ZEB are two listed companies. JAG is approximately 20 times the size of ZEB.
10 days ago JAG made a hostile bid for ZEB. offering a share exchange.
The bid price represents a 10% profit to the shareholders of ZEB at today's market prices to reflect the high levels of synergistic benefits that JAG expects to realise from the transaction.
Which of the following is the greatest future threat to the post-transaction value for JAG?
A company generates operating profit of $17.2 million, and incurs finance costs of $5.7 million.
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It plans to increase interest cover to a multiple of 5-to-1 by raising funds from shareholders to repay some existing debt. The pre-tax cost of debt is fixed at 5%, and the refinancing will not affect this.
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Assuming no change in operating profit, what amount must be raised from shareholders?
Â
Give your answer in $ millions to the nearest one decimal place.
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$Â ? Â Â