What is the fault with the calculation that has been performed?

An unlisted company is attempting to value its equity using the dividend valuation model. Relevant information is as follows: • A dividend of $500,000 has just been paid. • Dividend growth of 8% is expected for the foreseeable future. • Earnings growth of 6% is expected for the foreseeable future....

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What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?

A company plans to raise $12 million to finance an expansion project using a rights issue. Relevant data: • Shares will be offered at a 20% discount to the present market price of $15.00 per share. • There are currently 2 million shares in issue. • The project is forecast...

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Company T has 1,000 million shares in issue with a current share price of $10 each.

Company T has 1,000 million shares in issue with a current share price of $10 each. Company V has 300 million shares in issue with a current share price of $5 each. Company T is considering acquiring Company V. Total synergy gains of $100 million have been estimated. The purchase...

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What are the likely outcomes that will occur after the merger has happened?

Two listed companies in the same industry are joining together through a merger. What are the likely outcomes that will occur after the merger has happened? Select ALL that apply.A . Increase in customer base.B . Competition authorities step in to stop a potential price monopoly.C . Decrease in employee...

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Advise the Director B which THREE of the following statements should be included in his board paper to promote the issue of the convertible bond?

A company is considering the issue of a convertible bond compared to a straight bond issue (non-convertible bond). Director A is concerned that issuing a convertible bond will upset the shareholders for the following reasons: • it will dilute their control • the interest payments will be higher therefore reducing...

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Which of the following is the most appropriate discount rate to use when determining the enterprise value of the company?

A listed publishing company owns a subsidiary company whose business activity is training. It wishes to dispose of the subsidiary company. The following information is available: The board of the publishing company believe that the value of the subsidiary company, and hence the value of the equity invested in it,...

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Which THREE of the following long term changes are most likely to increase the credit rating of a company?

Which THREE of the following long term changes are most likely to increase the credit rating of a company?A . An increase in the interest cover ratio.B . A decrease in the (Net debt) / (Earnings before interest, tax, depreciation and amortisation) ratio.C . An increase in the free cashflow...

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Which of the following figures need to be used when calculating the value of the combined entity in $ millions?

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...

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Which of the following statements is true of a spin-off (or demerger)?

Which of the following statements is true of a spin-off (or demerger)?A . Raises finance to fund new projects.B . Changes the ownership structure of the core entity by introducing new shareholders.C . Allows investors to identify the true value of the demerged business.D . Increases the risk of a...

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Using the dividend growth model, advise the Board of Directors of Company M which of the following provide a reasonable valuation of Company M's equity?

Company M's current profit before interest and taxation is $5.0 million. It has a long-term 10% corporate bond in issue with a nominal value of $10 million. The rate of corporate tax is 25%. It plans to continue to pay out 50% of its earnings in dividends and earnings are...

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