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NEW QUESTION 38
An unlisted company.
* Is owned by the original founders and members of their families
* Pays annual dividends each year depending on the cash requirements of the dominant shareholders.
* Has earnings that are highly sensitive to underlying economic conditions.
* Is a small business in a large Industry where there are listed companies with comparable capital structures
Which of the following methods is likely to give the most accurate equity value for this unlisted company?

A. Discounted cash flow analysis at WACC (based on cash flows after tax but before financing) plus the market value of debt.B. Dividend valuation model.C. Net asset valuationD. P/E based valuation using the P/E of a similar company.

Answer: B

 

NEW QUESTION 39
Which THREE of the following statements are true of a money market hedge?

A. They may be a little more flexible in comparison to a forward contract.B. They offer roughly the same outcome as a forward contract.C. They are easy to set up.D. They are more complex than forward contracts.E. They leave the company exposed to currency risks.

Answer: B,D,E

 

NEW QUESTION 40
A company is considering taking out $10.000,000 of floating rate bank borrowings to finance a new project.
The current rate available to the company on floating rate barrowings is 8%. The borrowings contain a covenant based on an interested cover of 5 times.
The project is expected to generate the following results:

At what interest rate on the floating rate borrowings is the bank covenant first breached?

A. 8.0%B. 9.4%C. 11.0%D. 10.0%

Answer: C

 

NEW QUESTION 41
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