All Matches

Solution Library

Expert Answer

Textbooks

Search Textbook questions, tutors and Books

Oops, something went wrong!

Change your search query and then try again

Result Not Found

Books FREE
Tutors
Study Help
Hire a Tutor
AI Study Help New

Search
Sign In
Register

study help
business
fundamentals of financial management

Questions and Answers of Fundamentals Of Financial Management

What is the internal rate of return of the Chaotic Industries project from Activity 4.2?( Hint: Remember that you already know the NPV of this project at 15 per cent (from Activity 4.12).)
When we discounted the cash flows of the Billingsgate Battery Company machine project at 20 per cent, we found that the NPV was a positive figure of £24,190 (see p. 141 ).What does the NPV of the
What is the NPV of the Chaotic Industries project from Activity 4.2, assuming a 15 per cent opportunity cost of finance (discount rate)? (Use the table in Appendix A.)
What is the maximum the Billingsgate Battery Company would be prepared to pay for the machine, given the potential benefits of owning it?
See whether you can show that an investor would find £27,778, receivable now, equally acceptable to receiving £40,000 in two years’ time, assuming that there is a 20 per cent investment
Given that the Billingsgate Battery Company could invest its money at a rate of 20 per cent a year, what is the present (immediate) value of the expected first-year receipt of£20,000? In other
Can you see from the above why the PP method is not a complete answer to the problem concerning the timing of cash flows?
Sinclair Wholesalers plc is considering opening a new sales outlet in Coventry. Two possible sites have been identified for the new outlet. Site A has an area of 30,000 sq m. It will require an
Can you figure out what the major defect is? ( Hint: It is not concerned with the ability of the decision maker to forecast future events, though this too can be a problem. Try to remember the
Chaotic Industries is considering an investment in a fleet of ten delivery vans to take its products to customers. The vans will cost £15,000 each to buy, payable immediately.The annual running
Explain the key stages in the investment decision-making process.
Use each method to reach a decision on a particular investment opportunity.
Identify and discuss the four main investment appraisal methods found in practice.
Nimby plc is considering two mutually exclusive projects: Delphi and Oracle. The possible NPVs for each project and their associated probabilities are as follows:Delphi Oracle NPV£m Probability of
Devonia (Laboratories) Ltd has recently carried out successful clinical trials on a new type of skin cream, which has been developed to reduce the effects of ageing. Research and development costs
Helena Chocolate Products Ltd is considering the introduction of a new chocolate bar into its range of chocolate products. The new chocolate bar will require the purchase of a new piece of equipment
Simonson Engineers plc is considering the building of a new plant in Indonesia to produce products for the South-East Asian market. To date, £450,000 has been invested in market research and site
D’Arcy (Builders) Ltd is considering three possible investment projects: A, B and C. The expected pattern of cash flows for each project is:Project cash flows A£000 B£000 C£000 Initial outlay
Lee Caterers Ltd is about to make an investment in new kitchen equipment. It is considering whether to replace its existing kitchen equipment with cook/freeze or cook/chill technology.The following
Refer back to Example 5.6. Which project should be chosen and why? (Assume the possible outcomes are normally distributed.)
Kernow Ltd provides street-cleaning services for a small town. The work is currently labour intensive and few machines are employed. However, the business has recently been considering the purchase
Use the table provided in Appendix Bto calculate the equivalent annual annuity for each machine referred to in Example
What is the NPV for Machine B over the six-year period? Which machine is the better buy?In the case of Machine B, the NPV over the six-year period will be equal to the NPV above plus the equivalent
Describe the main approaches to the measurement of risk and discuss their limitations.
Discuss the nature of risk and explain why it is important in the context of investment decisions.
Discuss the effect of inflation on investment appraisal and explain how inflation may be taken into account.
Explain the modifications needed to the simple NPV decision rules where investment funds are limited or where there are competing projects with unequal lives.
Why should we expect this to be the case?A higher premium will often be needed to overcome resistance to the bid.
What is the attraction of this form of loan capital from the point of view of the target business’s shareholders?
Who do you think might benefit most from diversification?
What type of merger will achieve this objective? What are the potential problems of this kind of merger from the consumer’s point of view?
Identify and discuss the main methods of valuing the shares of a business.
Outline the tactics that may be used to defend against a hostile takeover bid.
Identify the likely winners and losers from takeover activity.
Discuss the advantages and disadvantages of each of the main forms of purchase consideration used in a takeover.
How might directors behave as a result of this focus on share price increases rather than dividends?
How might this affect the risk-taking behaviour of directors?
How might this alignment of interests occur?
What benchmark would be most suitable?Perhaps the best benchmark to use would be the returns made by similar businesses operating in the same industry over the same period of time.
How could the problems of interpretation mentioned above be overcome?
Try to identify at least one practical problem that may arise when using SVA calculations to reward managers. ( Hint: Think about how SVA is calculated.
Calculate the EVA margin for the second year of Scorpio plc in Example 11.3 .
Can you work out the EVA ® for the second year of Scorpio plc in Example 11.3 ?
What can managers do in order to increase EVA ®? ( Hint: Use the formula shown above as your starting point.)
Can you think of at least one practical problem of adopting an SVA approach?
What is the shareholder value figure for the business in Example 11.2 ? Would the sale of the shares at £11 per share really add value for the shareholders of Bortex plc?
Libra plc has an estimated terminal value (representing cash flows beyond the planning horizon) of £100 million. What is the present value of this figure assuming a discount rate of 12 per cent and
Discuss the advantages and disadvantages of awarding share options to senior managers as a means of promoting shareholder value.
Explain market value added (MVA) and total shareholder return (TSR)and evaluate their usefulness for investors.
Explain shareholder value analysis (SVA) and economic value added(EVA®) and discuss their role in measuring and delivering shareholder value.
Assume that Freezeqwik Ltd ( Activity 10.13 ) wishes to reduce its OCC by 30 days. Evaluate each of the options available to this business.
The financial statements of Freezeqwik Ltd, a distributor of frozen foods, for the year ended 31 December last year are:Income statement for the year ended 31 December last year£000 £000 Sales
Can you think what these reasons may be?
We mentioned above that although banks are usually prepared to supply references, their contents are not always very informative. Why might this be the case?
Assume the same facts as in Activity 10.4 . However, we are also told that the business maintains buffer inventories of 300 units. At what level should the business reorder?6. Hora plc holds
What kinds of changes in the business environment might lead to a decision to change the level of investment in working capital? Try to identify four possible changes that could affect the working
Why will it result in greater equity between the two shareholder groups?
How will the gearing ratio of a business be affected by:(a) a scrip dividend(b) a cash dividend?
Are these attitudes of managers described above consistent with another view of dividends discussed earlier?
With which theory would this behaviour be consistent? (Hint: think back to Chapter 6 .)
Can you figure out the possible reasoning behind this suggestion? Do you agree with such a suggestion?
Why should this be the case?Businesses with a stable pattern of profits are able to plan with greater certainty and are less likely to feel a need to retain profits for unexpected events.
How can lenders go about restricting shareholders’ rights to dividends? ( Hint: Think back to Chapter 6 .)
Why would managers use dividends as a means of conveying information about the business’s prospects? Why not simply issue a statement to shareholders? Try to think of at least one reason why
There is one situation where even MM would accept that ‘a bird in the hand is worth two in the bush’ (that is, that immediate dividends are preferable). Can you think what it is?( Hint: Think of
Suppose that Merton plc (see Example 9.1 ) replaces the £30,000 paid out as dividends by an issue of shares to new shareholders. Show the statement of financial position after the new issue and
Why might an increase in the dividend ( D1) not lead to an increase in share price ( P0 )?( Hint: Think of the other variables in the equation.)
Explain what share buybacks involve and discuss the main issues that they raise.
Describe the nature of scrip dividends and discuss the case for and against this form of distribution.
Identify and discuss the factors that influence dividend policy in practice.
Describe the nature of dividends and evaluate the arguments concerning their potential impact on shareholder wealth.
In Chapter 6we came across an alternative theory as to the way in which different sources of long-term capital are included in the capital structure of a business. Can you recall what it is and
In Figure 8.13we saw the traditional view of the relationships between the cost of capital and the level of borrowing and the relationship between the value of the business and the level of
What factors are likely to influence the ability of a business to repay the amount borrowed and to pay interest at due dates?
Briefly evaluate each of the proposed financing options from the perspective of an existing shareholder.
Using the projected figures above, compute the return on ordinary shareholders’ funds ratio, earnings per share, interest cover ratio, gearing ratio and degree of financial gearing, assuming the
What is the degree of financial gearing for Alpha plc and Gamma plc for Year 2?
Using the above equation, calculate the degree of financial gearing for Gamma plc for Year 1.
Can you think of at least one situation where it would still be feasible for a business to use WACC when evaluating an investment project?
L.C. Conday plc has £50 million 10 per cent £1 preference shares in issue. The current market price is £0.92 and the shares are due to be redeemed in three years’ time at their nominal
Calculate the pre-tax cost of loan capital for Lim Associates plc. ( Hint: Start with a discount rate of 10 per cent.)
Discuss the key points in the debate over whether a business has an optimal capital structure.
Evaluate different capital structure options available to a business.
Calculate the degree of financial gearing for a business and explain its significance.
Calculate the weighted average cost of capital for a business and assess its usefulness when making investment decisions.
Assume that:(a) Ippo Ltd (see Example 7.4 ) provides additional ordinary share capital at the beginning of the investment period of £60 million, thereby eliminating the need for Andante Ltd to take
Can you think of reasons why there may be such a delay?
Assume that, instead of issuing a fixed number of shares, the directors of Celibes plc( see Example 7.3 ) wish to maximise the amount raised from the share issue. What would be the appropriate
Why is this important?If the issue price is above the current market price, it would be cheaper for the investor to buy shares in the open market (assuming transaction costs are not significant) than
An investor with 2,000 shares in Shaw Holdings plc (see Example 7.1 ) has contacted you for investment advice. She is undecided whether to take up the rights issue, sell the rights or allow the
What could be the effect of investors making systematic errors when buying and selling shares?
Can you explain why the relationship between the various forms of market efficiency explained above should be the case?
Could the fact that investors are able to transfer shares with ease also be of benefit to listed businesses?
Identify the problems that smaller businesses experience in raising finance and describe the ways in which they may gain access to long-term finance.
Outline the methods by which share capital may be issued.
Discuss the nature and implications of stock market efficiency.
Discuss the role and nature of the Stock Exchange.
What are share warrants and what are the benefits to a business of issuing share warrants?
Trader Ltd is a wholesaler of imported washing machines. The business is partly funded by a bank overdraft and the bank is putting pressure on Trader Ltd to reduce this as soon as possible.Sales
Rusli Ltd provides a car valet service for car hire businesses when their cars are returned from hire. Details of the service costs are as follows:Per car£ £Car valet charge 20 Less Variable costs

Showing 800 - 900 of 3354

First
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Last

Services

Sitemap
Fun
Definitions
Become Tutor
Study Help Categories
Recent Questions
Expert Questions

Company Info

Security
Copyrights
Privacy Policy
Terms & Conditions
SolutionInn Fee
Scholarship

Get In Touch

About Us
Contact Us
Career
Jobs
FAQ
Campus Ambassador

Secure Payment

Download Our App

© 2024 SolutionInn. All Rights Reserved