F3 Exam Dumps - Financial Strategy

A listed company is financed by debt and equity.

If it increases the proportion of debt in its capital structure it would be in danger of breaching a debt covenant imposed by one of its lenders.

 

The following data is relevant:

  

 

The company now requires $800 million additional funding for a major expansion programme. 

 

Which of the following is the most appropriate as a source of finance for this expansion programme?

Company XXY operates in country X with the X$ as its currency. It is looking to acquire company ZZY which operates in country Z with the Z$ as its currency.

The assistant accountant at Company XXY has started to prepare an initial valuation of Company ZZY's equity for the first 3 years, however their valuation is incomplete. TBC' in the table below indicates that her calculations have yet to be completed.

The following information is relevant:

What is the correct figure (to the nearest million S) to include in year 3 as the present value in X$ million?

Company A plans to acquire Company B.

Both firms operate as wholesalers in the fashion industry, supplying a wide range of ladies' clothing shops.

Company A sources mainly from the UK, Company B imports most of its supplies from low-income overseas countries.

Significant synergies are expected in management costs and warehousing, and in economies of bulk purchasing.

 

Which of the following is likely to be the single most important issue facing Company A in post-merger integration?

A company is financed as follows:

   • 400 million $1 shares quoted at $3.00 each.

   • $800 million 5% bonds quoted at par.

The company plans to raise $200 million long term debt to finance a project with a net present value of $100 million.

The bank that is providing the debt is insisting on a maximum gearing level covenant.  

Gearing will be based on market values and calculated as debt/(debt + equity).

 

What is the lowest figure for the gearing covenant that the bank could impose without the company breaching the agreement?

A company has a cash surplus which it wishes to distribute to shareholders by a share repurchase rather than paying a special dividend.

 

Which THREE of the following statements are correct?

A company is located in a single country. The company manufactures electrical goods for export and for sale in its home country. When exporting, it invoices in its customers' currency. What currency risks is the company exposed to?

A company financed by equity and debt can be valued by discounting:

A company is valuing its equity prior to an initial public offering (IPO). 

 

Relevant data:

   • Earnings per share $1.00

   • WACC is 8% and the cost of equity is 12%

   • Dividend payout ratio 40%

   • Dividend growth rate 2% in perpetuity

 

The current share price using the Dividend Valuation Model is closest to: