F3 Exam Question 126
A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months.
It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings.
The company already has a commercial paper programme in place and has a good relationship with its bank.
Which of the following is likely to be the most cost effective method of borrowing the money?
It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings.
The company already has a commercial paper programme in place and has a good relationship with its bank.
Which of the following is likely to be the most cost effective method of borrowing the money?
F3 Exam Question 127
The following information relates to Company ZZA's current capital structure:
Company ZZA is considering a change in the capital structure that will increase gearing to 35:65 (Debt Equity).
The risk-free rate is 4% and the return on the market portfolio is expected to be 12%.
The rate of corporate tax is 25%
Using the Capital Asset Pricing Model, calculate the cost of equity resulting from the proposed change to the capital structure.
Company ZZA is considering a change in the capital structure that will increase gearing to 35:65 (Debt Equity).
The risk-free rate is 4% and the return on the market portfolio is expected to be 12%.
The rate of corporate tax is 25%
Using the Capital Asset Pricing Model, calculate the cost of equity resulting from the proposed change to the capital structure.
F3 Exam Question 128
A company plans to raise $12 million to finance an expansion project using a rights issue.
Relevant data:
* Shares will be offered at a 20% discount to the present market price of $15.00 per share.
* There are currently 2 million shares in issue.
* The project is forecast to yield a positive NPV of $6 million.
What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?
Relevant data:
* Shares will be offered at a 20% discount to the present market price of $15.00 per share.
* There are currently 2 million shares in issue.
* The project is forecast to yield a positive NPV of $6 million.
What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?
F3 Exam Question 129
A company is considering the issue of a convertible bond compared to a straight bond issue (non-convertible bond).
Director A is concerned that issuing a convertible bond will upset the shareholders for the following reasons:
* it will dilute their control
* the interest payments will be higher therefore reducing liquidity
* it will increase the gearing ratio therefore increasing financial risk
Director B disagrees, and is preparing a board paper to promote the issue of the convertible bond rather than a non-convertible.
Advise the Director B which THREE of the following statements should be included in his board paper to promote the issue of the convertible bond?
Director A is concerned that issuing a convertible bond will upset the shareholders for the following reasons:
* it will dilute their control
* the interest payments will be higher therefore reducing liquidity
* it will increase the gearing ratio therefore increasing financial risk
Director B disagrees, and is preparing a board paper to promote the issue of the convertible bond rather than a non-convertible.
Advise the Director B which THREE of the following statements should be included in his board paper to promote the issue of the convertible bond?
F3 Exam Question 130
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?
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?