The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.
### p_0 = \frac{d_1}{r - g} ###
Which expression is NOT equal to the expected dividend yield?
Question 444 investment decision, corporate financial decision theory
The investment decision primarily affects which part of a business?
Which of the following statements about book and market equity is NOT correct?
Read the following financial statements and calculate the firm's free cash flow over the 2014 financial year.
UBar Corp | ||
Income Statement for | ||
year ending 30th June 2014 | ||
$m | ||
Sales | 293 | |
COGS | 200 | |
Rent expense | 15 | |
Gas expense | 8 | |
Depreciation | 10 | |
EBIT | 60 | |
Interest expense | 0 | |
Taxable income | 60 | |
Taxes | 18 | |
Net income | 42 | |
UBar Corp | ||
Balance Sheet | ||
as at 30th June | 2014 | 2013 |
$m | $m | |
Assets | ||
Cash | 30 | 29 |
Accounts receivable | 5 | 7 |
Pre-paid rent expense | 1 | 0 |
Inventory | 50 | 46 |
PPE | 290 | 300 |
Total assets | 376 | 382 |
Liabilities | ||
Trade payables | 20 | 18 |
Accrued gas expense | 3 | 2 |
Non-current liabilities | 0 | 0 |
Contributed equity | 212 | 212 |
Retained profits | 136 | 150 |
Asset revaluation reserve | 5 | 0 |
Total L and OE | 376 | 382 |
Note: all figures are given in millions of dollars ($m).
The firm's free cash flow over the 2014 financial year was:
The Australian dollar's value was:
Did the Australian dollar or against the US dollar between these dates?
Which of the below formulas gives the profit ##(\pi)## from being short a put option? Let the underlying asset price at maturity be ##S_T##, the exercise price be ##X_T## and the option price be ##f_{LP,0}##. Note that ##S_T##, ##X_T## and ##f_{LP,0}## are all positive numbers.
Question 729 book and market values, balance sheet, no explanation
If a firm makes a profit and pays no dividends, which of the firm’s accounts will increase?
An investor bought a 5 year government bond with a 2% pa coupon rate at par. Coupons are paid semi-annually. The face value is $100.
Calculate the bond's new price 8 months later after yields have increased to 3% pa. Note that both yields are given as APR's compounding semi-annually. Assume that the yield curve was flat before the change in yields, and remained flat afterwards as well.
Question 973 foreign exchange rate, monetary policy, no explanation
Suppose the market expects the Reserve Bank of Australia (RBA) to increase the policy rate by 25 basis points at their next meeting. The current exchange rate is 0.8 USD per AUD.
Then unexpectedly, the RBA announce that they will leave the policy rate unchanged due to increasing unemployment and fears of a potential recession.
What do you expect to happen to Australia's exchange rate on the day when the surprise announcement is made? The Australian dollar is likely to: