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Breanna Ollech verified

Numerade educator

ignoring the discount factor while looking Standard deviation and varience

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how to calculate financial distress

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Tanya Chase verified

Numerade educator

A. Briefly explain the concept of purchasing power parity. (2 marks)

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Maria Dearborn verified

Numerade educator

List reasons why companies merge

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Hubert Agamasu verified

Numerade educator

A. Briefly discuss the three schools of thought regarding the dividend policy? (9 Marks) B. List any three assumptions of the MM Theory on dividend irrelevancy (3 marks)

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Danielle Fairburn verified

Numerade educator

You run a small photocopy business on campus. In order to continue to run your business you need to replace two industrial sized printer/copiers. You have a choice between the PrintFast brand and the PrintCheap brand. The PrintFast machine costs R65 000 up front and will cost an additional R5 000 in maintenance at the end of each year. The PrintCheap brand costs R30 000 up front as well as an additional R10 000 each year in maintenance. The PrintFast machine is expected to last 15 years and have a final salvage value of R5 000. The PrintCheap machine is expected to last 8 years and have no salvage value. Given a discount rate of 8%, which machine should you purchase and why?

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Use the following information to answer question A, B and C: 1 year 2 year 3 year 4 year Spot Rates 12% 11% 9% 7% A. According to the expectation hypothesis, what does the market believe is going to happen to the short term interest rates in the future? [4 marks] B. Calculate the duration of a 5% coupon bond with a face value of R1000 and 4 years until expiration. Show all working and discount each cash flow using the spot rates provided. [10 marks] C. Calculate the Yield to maturity of the bond from question B. [6 marks]

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Susan Hallstrom verified

Numerade educator

The spot peso/$US exchange rate is peso 10.9892/$US. The three-month forward rate is peso 11.0408/$US. What is the peso's forward premium (or discount) on the U.S. dollar, expressed as an annual percentage?A. 0.8 percent premium B. 1.9 percent discount C. 2.1 percent premium D. 0.5 percent discount E. 0.8 percent discount

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Breanna Ollech verified

Numerade educator

You are considering starting up a business selling clay animal ornaments. You have the following estimates: Asset beta, 𝛽𝐴 2.2 Market risk premium 8.1% Risk-free rate 4.5% Tax rate 30% You would like to have a debt to equity ratio of 1 and you believe that you can borrow at 6%. You will need an initial investment of R1 million to start up the business. The investment will be financed with R400 000 from debt and the balance from equity. The business will provide an expected pre-tax cash flow of R285 000 each year starting 1 year from now. B. Calculate the beta for debt and beta for equity. (4 marks)

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FlyingBirds Corp. is expected to generate the following free cash flows (FCF) over the next 3 years: Year FCF (i million) 131 2 98 3 145 After that, the FCF's are expected to grow at the industry average of 5% per year. Using the discounted FCF model and an after-tax weighted average cost of capital of 16%, what is the present value of FlyingBird's equity (assuming the market value of its debt is $550 million and the company has no cash holdings)? A) $615.4 mil B) $271.3 mll C) $834.1 mil D) $1165.4 mil E) $979.6 mll

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