A listed company is planning a share repurchase.
Research into different offer prices has given the following data with regards acceptance by the shareholders at different prices:

What price should be offered to shareholders if the retained earnings of the company are to remain unchanged?

• A.$8.50
• B.$9.00
• C.$10.00
• D.$9.50

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M is an accountant who wishes to take out a forward rate agreement as a hedging instrument but the company treasurer has advised that a short-term interest rate future would be a better option.
Which of the following is true of a short-term interest rate

• A.It can be tailored to the exact reeds of the company.
• B.It interest rates have gone down the price of the future will have fallen.
• C.It must be kept for ne whole duration of the contract
• D.The date is flexible and the position can be closed quickly and easily.

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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 intends to offer $60 million and expects to be able to realise synergistic benefits of $20 million by combining the two businesses. This estimate excludes the estimated $8 million cost of integrating the two businesses.
Which of the following figures need to be used when calculating the value of the combined entity in $ millions?

• A.8, 20, 50, 60, 200
• B.8, 20, 50, 200
• C.20, 50, 60, 200
• D.7, 10, 20, 50, 200

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Company T is a listed company in the retail sector.
Its current profit before interest and taxation is $5 million.
This level of profit is forecast to be maintainable in future.
Company T has a 10% corporate bond in issue with a nominal value of $10 million.
This currently trades at 90% of its nominal value.
Corporate tax is paid at 20%.
The following information is available:
Which of the following is a reasonable expectation of the equity value in the event of an attempted takeover?

• A.$41.6 million
• B.$32.0 million
• C.$50.2 million
• D.$65.0 million

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Company Y plans to diversify into an activity where Company X has an equity beta of 1.6, a debt beta of zero and gearing of 50% (debt/debt plus equity).
The risk-free rate of return is 5% and the market portfolio is expected to return 10%.
The rate of corporate income tax is 30%.
What would be the risk-adjusted cost of equity if Company Y has 60% equity and 40% debt?

• A.11.9%
• B.11.6%
• C.13%
• D.9.1%

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