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Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?
A company has in a 5% corporate bond in issue on which there are two loan covenants. • Interest cover must not fall below 3 times • Retained earnings for the year must not fall below $3.5 million The Company has 200 million shares in issue. The most recent dividend...
Which THREE of the following remain unchanged over the life of a 10 year fixed rate bond?
Which THREE of the following remain unchanged over the life of a 10 year fixed rate bond?A . The coupon rateB . The yieldC . The market valueD . The nominal valueE . The amount payable on maturityView AnswerAnswer: A,D,E
What will the company's new interest rate profile be?
A company has some 7% coupon bonds in issue and wishes to change its interest rate profile. It has decided to do this by entering into a plain coupon interest rate swap with it's bank. The bank has quoted a swap rate of: 6.0% - 6.5% fixed against LIBOR. What...
What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P/E movement both occur?
A company's current earnings before interest and taxation are $5 million. These are expected to remain constant for the forseeable future. The company has 10 million shares in issue which currently trade at $3.60. It also has a $10 million long term floating rate loan. The current interest rate on...
A company financed by equity and debt can be valued by discounting:
A company financed by equity and debt can be valued by discounting:A . free cash flow before interest at WACC . free cash flow before interest at the cost of equity.D . free cash flow after interest at WACF . free cash flow after interest at the cost of equity.View...
If the company increases the dividend by 4%, advise the Board of Directors if the level of retained earnings will comply with the covenant?
A company has a covenant on its 5% long-term bond, stipulating that its retained earnings must not fall below $2 million. The company has 100 million shares in issue. Its most recent dividend was $0.045 per share. It has committed to grow the dividend per share by 4% each year....
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 $300,000 at a fixed interest rate of 5% •...
Which of the following changes would be most likely to help the company achieve its objective?
A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit margin of at least 10% each year. Relevant data: • The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose currency...
Which THREE of the following are weaknesses of using the dividend growth model to value an unlisted company such as Company B?
Company A plans to acquire Company B, an unlisted company which has been in business for 3 years. It has incurred losses in its first 3 years but is expected to become highly profitable in the near future. No listed companies in the country operate the same business field as...
Which of the following actions would result in the company achieving a more optimal capital structure?
A company's gearing (measured as debt/(debt + equity)) is currently 60% and it is investigating whether an optimal gearing structure exists within the industry. It has analysed the capital structure of similar companies in the industry and it would appear that there is evidence supporting the traditional theory of capital...
