Finance

4387 Words Mar 24th, 2013 18 Pages
SEAT NUMBER: ……….… ROOM: .………………. FAMILY NAME.………….....…………………………. This question paper must be returned. Candidates are not permitted to remove any part of it from the examination room. OTHER NAMES…………….…………………..…….. STUDENT NUMBER………….………..……………..

MID-YEAR EXAMINATIONS 2011
Unit: ACCG252: Applied Financial Analysis and Management Date: Tuesday 14th June 2011 at 8:50am Time Allowed: 3 hours plus 10 minutes reading time. Total Number of Questions: 30 Multiple Choice Questions plus 9 full response questions. Instructions: 1. PART A (30 marks): There are 30 multiple choice questions. Answers to these must be recorded on a red-coloured General Purpose Answer Sheet which will be marked by a computer. Please make sure your name is on
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The firm has no preference shares. The current debt-to-equity ratio is 0.58 and the after-tax cost of debt is 6.4%. The company just hired a new CEO who is considering eliminating all debt financing. All else constant, what will the firm's cost of capital be if the firm switches to an all-equity firm? A. 14.14% B. 13.37% C. 12.62% D. 12.89% E. 11.45%

9. Which one of the following statements is accurate for a levered firm? A. A reduction in the risk level of a firm will tend to decrease the firm's WACC. B. An increase in the market risk premium will decrease a firm's WACC. C. WACC should be used as the required return for all proposed investments. D. A firm's WACC will decrease whenever the firm's tax rate decreases. E. The subjective approach totally ignores a firm's own WACC.

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10. Assume that you are comparing two firms which are identical, with one exception. Firm A is an all-equity firm and Firm B has a debt-to-equity ratio of 0.60. All else equal, Firm A will: A. have lower EPS than Firm B when the level of EBIT is relatively low B. generate a lower EBIT, but higher net income than Firm B C. always have higher EPS than Firm B, since it has no interest expense D. have lower EPS than Firm B when the level of earnings before interest and taxes (EBIT) is relatively high E. generate a higher EBIT, but lower net income than Firm B

11. Yamba Prawns Limited has just

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