1450 WordsDec 9, 20136 Pages

DEPARTMENT OF ACCOUNTING AND FINANCE
AFC2140 CORPORATE FINANCE
MID-SEMESTER TEST
FIRST SEMESTER 2012
SURNAME (FAMILY NAME)_____________________________________________
GIVEN NAME(S)______________________________________________________
ID NUMBER__________________________________________________________
TUTOR’S NAME______________________________________________________
TUTORIAL DAY AND TIME______________________________________________
INSTRUCTIONS:
TIME ALLOWED: 90 MINUTES WRITING TIME AND 5 MINUTES READING TIME
•
CLOSED BOOK TEST
•
ANSWER ALL 3 QUESTIONS (AND IN THE SPACES PROVIDED)
•
A FORMULA SHEET IS INCLUDED AT THE BACK
OFFICE USE ONLY
QUESTION
1
2
3
TOTAL (OUT OF 60)
MARK
Question 1 (30*…show more content…*

It has just paid a dividend of $3.00. If the required rate of return is 15 percent per annum, what is the price of the share three years from now?
A. $58.31
B. $46.29
C. $51.02
D. $47.50
Page 4 of 13
11. In evaluating capital projects, the decisions using the NPV method and the IRR method may disagree if
A. the projects are independent.
B. the cash flows pattern is unconventional.
C. the projects are mutually exclusive.
D. both B and C.
12. Jamaica Company is adding a new assembly line at a cost of $8.5 million. The company expects the project to generate cash flows of $2 million, $3 million, $4 million, and $5 million over the next four years. Its cost of capital is 16 percent per annum. What is the MIRR on this project? (Round to the nearest percent.)
A. 18%
B. 19%
C. 20%
D. 21%
13. The profitability index for a project is 1.18. If the project will produce cash inflows of $60,000 per annum for the next 12 years, what is the initial outlay for the project if the appropriate discount rate is 5 percent per annum? (Round to the nearest $10.)
A. $450,670
B. $627,520
C. $1,016,950
D. none of the above
14. Gilligan 's Boat Tours finds that if it were to increase its price by 10 percent, it would have a 6 percent reduction in the NPV of its new 3-Hour Tour. Gilligan 's analysis could be described as
A. a Monte Carlo simulation.
B. break even analysis.
C. sensitivity analysis.
D. none of the above.
15. Toki Ltd. had a degree of

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