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FIN – Finance

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Showing 4–6 of 10 questions

Question 4

Johar Co has earnings per share of $0·80 and a constant annual dividend payout ratio of 25%. Its equity shares have a beta of 1.2. The risk-free rate of return is 5% and the market rate of return is 8%.

What is the expected cost and predicted value of an equity share in Johar Co?

Select an option, then click Submit answer.

  • ○

    Expected cost = 20.6%, Predicted value = $3.88
  • ○

    Expected cost = 8.6%, Predicted value = $2.33
  • ○

    Expected cost = 8.6%, Predicted value = $9.30
  • ○

    Expected cost = 3.6%, Predicted value = $5.56
Question 5

The following exchange rates of UK sterling (£) against the Australian dollar (A$) have been quoted:

Spot £1 = A$1.7574

Six months’ forward, £1 = A$1.7245

The interest rate in Australia is 5% per year for a six-month deposit or borrowing.

What is the annual interest rate for a six-month deposit or borrowing in the UK?

Select an option, then click Submit answer.

  • ○

    4·45%
  • ○

    7·00%
  • ○

    8·90%
  • ○

    9·95%
Question 6

Etamin Co has equity shares in issue with a nominal value of $10m and a total market value of $18m. It also has irredeemable loan notes in issue with a nominal value of $10m and a total market value of $12m. Interest is payable on the loan notes at the coupon rate of 6% per year and the tax rate is 20%. The weighted average cost of capital of Etamin Co is 10%.

What is the company’s cost of equity?

Select an option, then click Submit answer.

  • ○

    12·7%
  • ○

    13·5%
  • ○

    14·0%
  • ○

    16·0%