F3 Exam Question 76
A listed company is financed by debt and equity.
If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant imposed by one of its lenders.
The following data is relevant:
The company now requires $800 million additional funding for a major expansion programme.
Which of the following is the most appropriate as a source of finance for this expansion programme?
If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant imposed by one of its lenders.
The following data is relevant:
The company now requires $800 million additional funding for a major expansion programme.
Which of the following is the most appropriate as a source of finance for this expansion programme?
F3 Exam Question 77
A manufacturing company is based in Country L whose currency is the L$.
One of the company's products is exported to Country M, a rapidly growing economy, whose currency is the M$.
In the most recent financial year:
* 100,000 units of the product were sold to customers in country M
* The unit selling price was M$12
The spot rate today is L$1 = M$5
The company has an objective of growth in total sales value in L$ of 10% a year.
If the L$ strengthens by 5% next year against the M$, what volume of sales of this product is needed next year to achieve the objective?
One of the company's products is exported to Country M, a rapidly growing economy, whose currency is the M$.
In the most recent financial year:
* 100,000 units of the product were sold to customers in country M
* The unit selling price was M$12
The spot rate today is L$1 = M$5
The company has an objective of growth in total sales value in L$ of 10% a year.
If the L$ strengthens by 5% next year against the M$, what volume of sales of this product is needed next year to achieve the objective?
F3 Exam Question 78
Company A has a cash surplus.
The discount rate used for a typical project is the company's weighted average cost of capital of 10%.
No investment projects will be available for at least 2 years.
Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?
The discount rate used for a typical project is the company's weighted average cost of capital of 10%.
No investment projects will be available for at least 2 years.
Which of the following is currently most likely to increase shareholder wealth in respect of the surplus cash?
F3 Exam Question 79
A company plans to raise finance for a new project.
It is considering either the issue of a redeemable cumulative preference share or a Eurobond.
Advise the directors which of the following statements would justify the issue of preference shares over a bond?
It is considering either the issue of a redeemable cumulative preference share or a Eurobond.
Advise the directors which of the following statements would justify the issue of preference shares over a bond?
F3 Exam Question 80
At the last financial year end, 31 December 20X1, a company reported:
The corporate income tax rate is 30% and the bank borrowings are subject to an interest cover covenant of 4 times.
The results are presently comfortably within the interest cover covenant as they show interest cover of 8.3 times. The company plans to invest in a new product line which is not expected to affect profit in the first year but will require additional borrowings of $20 million at an annual interest rate of 10%.
What is the likely impact on the existing interest cover covenant?
The corporate income tax rate is 30% and the bank borrowings are subject to an interest cover covenant of 4 times.
The results are presently comfortably within the interest cover covenant as they show interest cover of 8.3 times. The company plans to invest in a new product line which is not expected to affect profit in the first year but will require additional borrowings of $20 million at an annual interest rate of 10%.
What is the likely impact on the existing interest cover covenant?