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.9.4%
• B.11.0%
• C.10.0%
• D.8.0%

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KKL is a listed sports clothing company with three separate business units. KKL is seeking to sell TT', one of these business units TTP cwns a new. brand of trail running shoes that have Droved hugely popular with lone distance runners.
The management team of TTP are frustrated by the constraints imposes b/ KKL in managing tie brand and developing. the bus ness and they believe that TTF has huge growth potential.
The management team of TTP have approached KKL with a proposal to purchase 1~P through a management layout (MDO). KKL has accepted this proposal as TTP has not proved to be a good fit' with the rest of the business and has agreed on the selling price.
Which THREE of the following factors a-e mast Likely to affect the success of the MBO?

• A.The ability of the TTF management team to take over the head office functions successfully.
• B.The motivation of the TTP management team to invest in future growth.
• C.The constraints imposed by KKL managing TTF's brand.
• D.The ability the TTP management team to develop the brand and achieve the expected growth.
• E.Searing sufficient. funding for the MBO.

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A company plans to cut its dividend but is concerned that the share price will fall.
This demonstrates the _____________ effect

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Extracts from a company's profit forecast for the next financial year as follows:
Since preparing the forecast, the company has decided to return surplus cash to shareholders by a share repurchase arrangement.
The share repurchase would result in the company purchasing 20% of the 1,250 million ordinary shares currently in issue and canceling them.
Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be an increase of:

• A.$0.100
• B.$0.125
• C.$0.200
• D.$0.175

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When valuing an unlisted company, a P/E ratio for a similar listed company may be used but adjustments to the P/E ratio may be necessary.
Which THREE of the following factors would justify a reduction in the proxy p/e ratio before use?

• A.A profit item within the unlisted company's latest earnings which will not reoccur.
• B.The forecast earnings growth being relatively higher in the unlisted company.
• C.A lower level of scrutiny and regulation for unlisted companies.
• D.Unlisted companies being generally smaller and less established.
• E.The relative lack of marketability of unlisted company shares.
• F.Control premium not being included within the proxy p/e ratio used.

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