Question 86
PYP is a listed courier company. It is looking to raise new finance to fit each of its delivery vans with new equipment to allow improved parcel tracking for customers The senior management team of PYP have decided on a 10-year secured bond to finance this investment-
Which TWO of the following variables are most likely to decrease the yield to maturity of the bond?
Which TWO of the following variables are most likely to decrease the yield to maturity of the bond?
Question 87
A listed company plans to raise $350 million to finance a major expansion programme.
The cash flow projections for the programme are subject to considerable variability.
Brief details of the programme have been public knowledge for a few weeks.
The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.
The following data is relevant:
The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of 3% over the same period.
The directors favour the bond option.
However, the Chief Accountant has provided arguments for a rights issue.
Which TWO of the following arguments in favour of a right issue are correct?
The cash flow projections for the programme are subject to considerable variability.
Brief details of the programme have been public knowledge for a few weeks.
The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.
The following data is relevant:
The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of 3% over the same period.
The directors favour the bond option.
However, the Chief Accountant has provided arguments for a rights issue.
Which TWO of the following arguments in favour of a right issue are correct?
Question 88
On 1 January:
* Company ABB has a value of $55 million
* Company BBA has a value of $25 million
* Both companies are wholly equity financed
Company ABB plans to take over Company BBA by means of a share exchange Following the acquisition the post-tax cashflow of Company ABB for the foreseeable future is estimated to be $10 million each year The post-acquisition cost of equity is expected to be 10% What is the best estimate of the value of the synergy that would arise from the acquisition?
* Company ABB has a value of $55 million
* Company BBA has a value of $25 million
* Both companies are wholly equity financed
Company ABB plans to take over Company BBA by means of a share exchange Following the acquisition the post-tax cashflow of Company ABB for the foreseeable future is estimated to be $10 million each year The post-acquisition cost of equity is expected to be 10% What is the best estimate of the value of the synergy that would arise from the acquisition?
Question 89
A company gas a large cash balance but its directors have been unable to identify any positive NPV projects to invest in. Which THREE of the following are advantages of a share repurchase, compared with a one-off large dividend?
Question 90
Company A operates in country A and uses currency AS. It is looking to acquire Company B which operates in country B and uses currency B$. The following information is relevant:
The assistant accountant at Company A has prepared the following valuation of company B's equity, however there are some errors in his calculations.
Value of Company B's equity = 14.16 + 16.03 + 17.67 = AS47.86 million
Company B has BS5 million of debt finance.
Which of the following THREE statements are true?
The assistant accountant at Company A has prepared the following valuation of company B's equity, however there are some errors in his calculations.
Value of Company B's equity = 14.16 + 16.03 + 17.67 = AS47.86 million
Company B has BS5 million of debt finance.
Which of the following THREE statements are true?