12) The three key roles of financial management are 25) Issuance of new shares to existing shareholders is termed: a. Financing, structure and dividend b. Financing, investing and dividend c. Financing, equity and debt. d. Equity, debt and investing. a. Re-issue b. Initial Public Offering c. Private issue d. Rights issue 0. Dividend, structure and debt. e. Shareholders issue 13) Which of the following is most consistent with maximising shareholder wealth? 26) Return on investment of 17.65% implies that a. Seeking projects with positive NPV a. Profits were 17.65% higher than total assets. b. Profit maximisation b. There was 17.65% return on its investment in assets. c. Minimising the firm's cost of capital c. Profits make up 17.65% of total assets. d. Maximising earnings per share d. The company is performing well. Market share growth e. None of the above. 14) Which of the following statements about investment decision making methods 27) Capital Budgeting is a part of: is true? 3. Investment Decision. u. The payback method ignores all cash flows after the end of the payback c. Marketing Management. b. The net present value rule is to accept investment opportunities when d. Capital Structure. their rates of return exceed the company's welghted average cost of e. Financing Decision. capital is greater than the IRR 28) Which of the following are money market instruments? 1. Certificate of deposit d. The discounted payback method takes into account cash flows for all periods 3. Commercial paper e. None of the above 15) Which of the following is an advantage of the net present value method? a. It accounts for compounding of returns b. It is measured in time, not value c. It uses accrual basis, not cash basis accounting for a project d. It uses the accounting rate of return 4. Treasury bill e. None of the above a. 1,2 and 4 only c. 1,3 and 4 only d. 1 and 2 only e. 1,2,3 and 4 16) Which of the following securities has the least amount of default risk? a. Treasury bills a. That no retained earnings available for investment b. Corporate bonds c. Commercial paper d. Cortificate of deposit b. That limited funds are available for investment c. Bills of exchange 17) Which of the following is a difference between primary and secondary capital c. That no extemal funds can be raised for investment d. That no fresh investment is requin market? a. Primary markets are where stocks trade and secondary markets are where loan notes trade b. Primary capital markets relate to the sale of new securities, while secondary capital markets are where securities trade after their initial offering. c. Both primary and secondary capital markets relate to where securities are traded after their initial offering. d. Both primary and secondary capital markets relate to the sale of new securities e. None of the above 30) If the Money Discount Rate is 19% and Inflation Rate is 12%, then the Real Discount Rate is: b. 5% c. 5.70% c. 3.5% 31) Cost of Capital refers to: a. Flotation Cost b. Cost of equity c. Rate of Return d. Cost of funds e. Fair rate of return 5 32) Angel Company Limited, a small and medium enterprise, is in need of capital for growth and expansion. The company has approached Mr. Kankam, a business angel with keen interest in the industry the company operates. Angel is asking Mr. Kankam to offer them GH50,000 for a 20% stake in their Company Limited? a. GH200,000 b. GH&225,000 c. GH/250,000 d. GH/275,000 e. GH$300,000 33) Assuming, a company has outstanding shares in the company of 20,000 and the company's dividends to its present owners for the current year is GHd1.00 expected to grow at a stable rate of 6% annually, and the current cost would be estimated value of the company? a. GH190,000 b. GH4235,000 c. GH4240,000 d. GH&265,000 c. GH290,000 Use the information below to answer questions 34 to 37 Suppose Angel Company is partly financed by 500 outstanding 15 year bonds, each with face value of GH/1,000 with an annual coupon rate of 8% and Yield to Maturity of 10%. Equity shares outstanding of 20,000 with dividends per share of GH0.75, growth rate of 8%. Also suppose the market return on 1 year Government notes is 15% whereas 91 -day T-bill is 10%, and the current market returns for risky assets is 24%. Angel Company has a beta of 0.8. 34) What is the after-tax cost of debt for Angel Company? a. 10% b. 2% c. 8% d. 15% 35) What is the fair market return for Angel's equity holders? a. 14.0% b. 24.0% c. 22.2% d. 21.2%