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Question 458  capital budgeting, no explanation

Which of the following is NOT a valid method to estimate future revenues or costs in a pro-forma income statement when trying to value a company?



Question 460  bond pricing, premium par and discount bonds

Below are some statements about loans and bonds. The first descriptive sentence is correct. But one of the second sentences about the loans' or bonds' prices is not correct. Which statement is NOT correct? Assume that interest rates are positive.

Note that coupons or interest payments are the periodic payments made throughout a bond or loan's life. The face or par value of a bond or loan is the amount paid at the end when the debt matures.



Question 520  NPV, DDM

The following cash flows are expected:

  • Constant perpetual yearly payments of $70, with the first payment in 2.5 years from now (first payment at t=2.5).
  • A single payment of $600 in 3 years and 9 months (t=3.75) from now.

What is the NPV of the cash flows if the discount rate is 10% given as an effective annual rate?



Question 625  dividend re-investment plan, capital raising

Which of the following statements about dividend re-investment plans (DRP's) is NOT correct?



Question 666  rights issue, capital raising

A company conducts a 2 for 3 rights issue at a subscription price of $8 when the pre-announcement stock price was $9. Assume that all investors use their rights to buy those extra shares.

What is the percentage increase in the stock price and the number of shares outstanding? The answers are given in the same order.



Question 707  continuously compounding rate, continuously compounding rate conversion

Convert a 10% effective annual rate ##(r_\text{eff annual})## into a continuously compounded annual rate ##(r_\text{cc annual})##. The equivalent continuously compounded annual rate is:



Question 748  income and capital returns, DDM, ex dividend date

A stock will pay you a dividend of $2 tonight if you buy it today.

Thereafter the annual dividend is expected to grow by 3% pa, so the next dividend after the $2 one tonight will be $2.06 in one year, then in two years it will be $2.1218 and so on. The stock's required return is 8% pa.

What is the stock price today and what do you expect the stock price to be tomorrow, approximately?



Question 836  VaR, no explanation

The 95% daily VaR corresponds to the result on the:



Question 951  option, in the money option

If a call option is in-the-money, then the spot price (##S_0##) is than, than or to the call option's strike price (##K_T##)?


Question 983  corporate financial decision theory, DuPont formula, accounting ratio

A company manager is thinking about the firm's book assets-to-equity ratio, also called the 'equity multiplier' in the DuPont formula:

###\text{Equity multiplier} = \dfrac{\text{Total Assets}}{\text{Owners' Equity}}###

What's the name of the decision that the manager is thinking about? In other words, the assets-to-equity ratio is the main subject of what decision?

Note: DuPont formula for analysing book return on equity:

###\begin{aligned} \text{ROE} &= \dfrac{\text{Net Profit}}{\text{Sales}} \times \dfrac{\text{Sales}}{\text{Total Assets}} \times \dfrac{\text{Total Assets}}{\text{Owners' Equity}} \\ &= \text{Net profit margin} \times \text{Total asset turnover} \times \text{Equity multiplier} \\ \end{aligned}###