12) The three key roles of financial management are 25) Issuance of new shares to existing shareholders is termed: a, Re-Issue a. Financing, structure and dividend b. Financing, investing and dividend c. Financing, equity and debt. d. Equity, debt and investing. e. Dividend, structure and debt. b. Initial Public Offering c. Private issue e. Shareholders issue 13) Which of the following is most consistent with maximising shareholder wealth? 26) Return on investment of 17.65% implles 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. c. 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? B. Investment Decision. a. The payback method ignores all cash flows after the end of the payback b. Working Capital Management. period 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 weighted average cost of capital 28) Which of the following are money market instruments? c. The internal rate of return rule is to accept the investment if the WACC 1. Certificate of deposit is greater than the IRR d. The discounted payback method takes into account cash flows for all 2. Corporate bond periods 3. Commerclal paper . None of the above 15) Which of the following is an advantage of the net present value method? . 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 - Treasury bill e. None of the above 16) Which of the following securities has the least amount of default risk? a. Treasury bills b. Corporate bonds c. Commercial paper d. Certificate of deposit c. Bills of exchange 17) Which of the following is a difference between primary and secondary capital 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 a. 1,2 and 4 only c. 1,3 and 4 only d. 1 and 2 only e. 1,2,3 and 4 29) In capital budgeting, the term Capital Rationing implies: a. That no retained earnings available for investment b. That limited funds are avaliable for investment c. That no external funds can be raised for investment e. That there is no budget in use. 30) If the Money Discount Rate is 19% and Inflation Rate is 12%, then the Real Discount Rate is: a. 7% c. 5.70% d. 6.25% 31) Cost of Capital refers to: a. Flotation Cost b. Cost of equity c. Rate of Return c. Fair rate of return 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 business. Based on Angel's offer, what is the estimated value of Argel Company Limited? a. GH/200,000 b. GH/225,000 c. GH/250,000 d. GH4275,000 c. \( \mathrm{GH} \Varangle 300,000 \) 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 GH$1.00 expected to grow at a stable rate of 6% annually, and the current cost of equity is 14%, using the constant growth dividend discount model, what would be estimated value of the company? a. GH&190,000 b. GH235,000 c. GH240,000 e. GH4290,000 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 GH1,000 with an annual coupon rate of 8% and Yield to Maturity of 10%. Equity shares outstanding of 20,000 with dividends per share of GHCO.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% e. 24% 35) What is the fair market return for Angel's equity holders? a. 14.0% b. 24.0% c. 22.2% d. 21.2% e. 23.2%