Essay on Fins1613 Past Year

5475 Words Nov 5th, 2012 22 Pages
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THE UNIVERSITY OF NEW SOUTH WALES FINS1613 BUSINESS FINANCE FINAL EXAM
OCTOBER / NOVEMBER 2009

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TIME ALLOWED - 2 HOURS TOTAL NUMBER OF QUESTIONS – 50. ANSWER ALL QUESTIONS. ALL QUESTIONS ARE OF EQUAL VALUE. THERE IS NO NEGATIVE MARKING. THIS PAPER MUST NOT BE RETAINED BY THE CANDIDATE. CANDIDATES NEED TO BRING A PENCIL AND ERASER TO THE EXAMINATION. CANDIDATES NEED TO BRING A UNIVERSITY APPROVED CALCULATOR TO THE EXAM. MATHEMATICAL TABLES ARE PRINTED AT THE BACK OF THIS EXAM PAPER.

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PRINT YOUR STUDENT NUMBER ON THE TOP RIGHT HAND CORNER OF THIS PAGE. ANSWER ALL QUESTIONS ON THE ANSWER SHEET PROVIDED. ALL ANSWERS MUST BE IN PENCIL.

FINS 1613 Final
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What is the levered value of the firm? Assume M&M under the classical tax case. a) b) c) d) e) $9,800,000 $8,000,000 $5,750,000 $6,655,250 $5,528,750

FINS 1613 Final Exam

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T2 2009

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The Global Advertising Company has a marginal tax rate of 40 percent. The company can raise debt at a 12 percent interest rate and the last dividend paid by Global was $0.90. Global’s common stock is selling for $8.59 per share, and its expected growth rate in earnings and dividends is 5 percent. Global plans to finance all capital expenditures with 30 percent debt and 70 percent equity. If the firm has sufficient retained earnings to fund the equity portion of its capital budget, what is the firm’s weighted average cost of capital after corporate tax under a classical tax system? a) b) c) d) e) 11.95% 12.22% 12.88% 13.36% 14.21%

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The maximum firm value, according to the static theory of capital structure, occurs at a point where the: a) b) c) d) e) value of a levered firm initially begins to exceed that of an unlevered firm financial distress costs are equal to zero value of the firm is equal to the value defined by M&M Proposition I, with tax value of the firm, as defined by M&M Proposition I, with tax, is exactly equal to the value of the firm, as defined by M&M Proposition I, without tax value of the firm equalizes the costs of financial distress with the present value of the tax shield on debt

FINS 1613 Final Exam

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