Question 36

A UK company enters into a 5 year borrowing with bank P at a floating rate of GBP Libor plus 3% It simultaneously enters into an interest rate swap with bank Q at 4.5% fixed against GBP Libor plus 1.5% What is the hedged borrowing rate, taking the borrowing and swap into account?
Give your answer to 1 decimal place.

Question 37

Which THREE of the following are likely to be strategic reasons for a horizontal acquisition?
  • Question 38

    A company intends to sell one of its business units. Company W, by a management buyout (MBO). A selling price of S200 million has been agreed.
    The managers are discussing with a bank and a venture capital company (VCC) the following financing proposal.

    The VCC requires a minimum return on its equity investment In the MBO of 35% a year on a compound basis over 5 years What is the minimum total equity value of Company W in 5 years time in order to meet the VCC's required return? Give your answer to one decimal place.

    Question 39

    The competition authorities are investigating the takeover of Company Z by a larger company, Company Y.
    Both companies are food retailers.
    The takeover terms involve using a part cash, part share exchange means of payment.
    Company Z is resisting the bid, arguing that it undervalues its business, while lobbying extensively among politicians to sway public opinion against the bidder.
    Which of the following actions by Company Y is most likely to persuade the competition authorities to approve the acquisition?
  • Question 40

    A company generates and distributes electricity and gas to households and businesses.
    Forecast results for the next financial year are as follows:
    The Industry Regulator has announced a new price cap of $1.50 per Kilowatt.
    The company expects this to cause consumption to rise by 10% but costs would remained unaltered.
    The price cap is expected to cause the company's net profit to fall to: