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What is the fault with the calculation that has been performed?
An unlisted company is attempting to value its equity using the dividend valuation model. Relevant information is as follows: • A dividend of $500,000 has just been paid. • Dividend growth of 8% is expected for the foreseeable future. • Earnings growth of 6% is expected for the foreseeable future....
What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?
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...
Company T has 1,000 million shares in issue with a current share price of $10 each.
Company T has 1,000 million shares in issue with a current share price of $10 each. Company V has 300 million shares in issue with a current share price of $5 each. Company T is considering acquiring Company V. Total synergy gains of $100 million have been estimated. The purchase...
What are the likely outcomes that will occur after the merger has happened?
Two listed companies in the same industry are joining together through a merger. What are the likely outcomes that will occur after the merger has happened? Select ALL that apply.A . Increase in customer base.B . Competition authorities step in to stop a potential price monopoly.C . Decrease in employee...
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?
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...
Which of the following is the most appropriate discount rate to use when determining the enterprise value of the company?
A listed publishing company owns a subsidiary company whose business activity is training. It wishes to dispose of the subsidiary company. The following information is available: The board of the publishing company believe that the value of the subsidiary company, and hence the value of the equity invested in it,...
Which THREE of the following long term changes are most likely to increase the credit rating of a company?
Which THREE of the following long term changes are most likely to increase the credit rating of a company?A . An increase in the interest cover ratio.B . A decrease in the (Net debt) / (Earnings before interest, tax, depreciation and amortisation) ratio.C . An increase in the free cashflow...
Which of the following figures need to be used when calculating the value of the combined entity in $ millions?
Listed company R is in the process of making a cash offer for the equity of unlisted company S. Company R has a market capitalisation of $200 million and a price/earnings ratio of 10. Company S has a market capitalisation of $50 million and earnings of $7 million. Company R...
Which of the following statements is true of a spin-off (or demerger)?
Which of the following statements is true of a spin-off (or demerger)?A . Raises finance to fund new projects.B . Changes the ownership structure of the core entity by introducing new shareholders.C . Allows investors to identify the true value of the demerged business.D . Increases the risk of a...
Using the dividend growth model, advise the Board of Directors of Company M which of the following provide a reasonable valuation of Company M's equity?
Company M's current profit before interest and taxation is $5.0 million. It has a long-term 10% corporate bond in issue with a nominal value of $10 million. The rate of corporate tax is 25%. It plans to continue to pay out 50% of its earnings in dividends and earnings are...
