Company A is based in country A with the AS as its functional currency. It expects to receive BS20 million from Company B in settlement of an export invoice.
The current exchange rate is A$1 =B$2 and the daily standard deviation of this exchange rate = 0 5% What is the one-day 95% VaR in AS?

• A.A$50,000
• B.A$822,500
• C.A$82,250
• D.A$164,500

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A listed company plans to raise $350 million to finance a major expansion programme.
The cash flow projections for the programme are subject to considerable variability.
Brief details of the programme have been public knowledge for a few weeks.
The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.
The following data is relevant:
The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of 3% over the same period.
The directors favour the bond option.
However, the Chief Accountant has provided arguments for a rights issue.
Which TWO of the following arguments in favour of a right issue are correct?

• A.The rights issue will lead to less pressure on the operating cash flows of the programme.
• B.The WACC will decrease assuming Modigliani and Miller's Theory of Capital Structure without taxes applies.
• C.The recent fall in the share price makes a rights issue more attractive to the company.
• D.The administrative costs of a rights issue will be lower.
• E.The issue of bonds might limit the availability of debt finance in the future.

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A national airline has made an offer to acquire a smaller airline in the same country.
Which of the following would be of most concern to the competition authorities?

• A.After the acquisition the board propose to reduce the number of flight destinations from the country.
• B.The acquisition is likely to result in significant redundancies of staff currently working for the smaller airline.
• C.The board informed a major institutional shareholder about the proposed acquisition before informing other shareholders.
• D.After the acquisition the board propose to increase prices significantly on routes where no other airlines operate.

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A UK based company is considering investing GBP1 ,000,003 in a project it the USA. It is anticipated that the project will yield net cash inflows of USD580.000 each year for the next three years. These surplus cash flows will be remitted to the UK at the end of each year.
Currently GBP1.00 is worth USD1.30.
The expected inflation rates in the two countries ever the next four years are 2% in the UK and 4% in the USA.
Applying the purchasing power parity theory, which of the following represents the expected remittance at the end of year three, in GBP whole the nearest whole GBP)?

• A.GBP472,916
• B.GBP546,547
• C.GBP450,906
• D.GBP568,846

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A manufacturing company is based in Country L whose currency is the L$.
One of the company's products is exported to Country M, a rapidly growing economy, whose currency is the M$.
In the most recent financial year:
* 100,000 units of the product were sold to customers in country M
* The unit selling price was M$12
The spot rate today is L$1 = M$5
The company has an objective of growth in total sales value in L$ of 10% a year.
If the L$ strengthens by 5% next year against the M$, what volume of sales of this product is needed next year to achieve the objective?

• A.110,000 units
• B.105,000 units
• C.104,500 units
• D.115,500 units

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