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Which of the following is likely to be the most cost effective method of borrowing the money?
A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months. It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings. The company already has a commercial paper...
Which of the following statements about IFRS 7 Financial Instruments: Disclosures is true?
Which of the following statements about IFRS 7 Financial Instruments: Disclosures is true?A . IFRS 7 only applies to entities that are designated as financial institutions by a regulatory authority.B . IFRS 7 requires disclosures to be given for each separate class of financial instruments.C . The main requirement of...
Which THREE of the following are practical considerations when determining the company's dividend/retention policy?
The Board of Directors of a small listed company engaged in exploration are currently considering the future dividend policy of the company. Exploration is considered a high-risk business and consequently the company has a low level of debt finance. Forecasts indicate a period of profit fluctuation in the next few...
with The International <IR> Framework as issued by the International Integrated Reporting Council?
Which of the following explains an aim of integrated reporting in accordance with The International <IR> Framework as issued by the International Integrated Reporting Council?A . To highlight the need for greater reporting of performance to stakeholders in a greater level of detail than at present.B . To support decision...
Which THREE of the following items are errors within the appraisal?
A company plans a four-year project which will be financed by either an operating lease or a bank loan. Lease details: • Four year lease contract. • Annual lease rentals of $45,000, paid in advance on the 1st day of the year. Other information: • The interest rate payable on...
After the investment, which of the following statements is correct?
A company wishes to raise additional debt finance and is assessing the impact this will have on key ratios. The following data currently applies: • Profit before interest and tax for the current year is $500,000 • Long term debt of $300,000 at a fixed interest rate of 5% •...
Is the planned increase in borrowings expected to help the company meet its gearing objective?
A company has a financial objective of maintaining a gearing ratio of between 30% and 40%, where gearing is defined as debt/equity at market values. The company has been affected by a recent economic downturn leading to a shortage of liquidity and a fall in the share price during 20X1....
Advise the venture capitalist which THREE of the following methods will enable it to exit its equity investment?
A venture capitalist has made an equity investment in a private company and is evaluating possible methods by which it can exit the investment over the next 3 years. The private company shareholders comprise the four original founders and the venture capitalist. Advise the venture capitalist which THREE of the...
Which of the following is the most appropriate as a source of finance for this expansion programme?
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...
According to Modigliani and Miller's theory of capital structure with tax, what will be Company B's new cost of equity?
Company B is an all equity financed company with a cost of equity of 10%. It is considering issuing bonds in order to achieve a gearing level of 20% debt and 80% equity. These bonds will pay a coupon rate of 5% and have an interest yield of 6%. Company...
