A firm pays a fully franked cash dividend of $100 to one of its Australian shareholders who has a personal marginal tax rate of 40%. The corporate tax rate is 30%.

What will be the shareholder's personal tax payable due to the dividend payment?

a. 14.2857

b. 10

c. 57.1429

d. 15

e. 21.4286

ou buy a stock from the capital market. If the capital market is semi-strong efficient, which of the following statements is NOT correct?

a. Past returns cannot be used to predict future stock returns.

b. The stock is under-priced.

c. You cannot earn any abnormal returns above the required return by trading on public information.

d. Stock prices reflect all publicly available information.

e. Fundamental analysis of publicly available information will not lead to abnormal returns.

A firm has a debt-to-equity ratio of 2:1.

The firms debt beta is 0.6.

Five-year government bonds yield 5% pa with a coupon rate of 3% pa. The market's expected dividend return is 2% pa and its expected capital return is 8% pa.

The firm stocks next dividend is expected to be $2, paid one year from now. Dividends are expected to be paid annually and grow by 3% pa forever. The current stock price $10.

The corporate tax rate is 30%. Assume a classical tax system.

Which statement is NOT correct?

a. The expected return on debt is 8% pa.

b. The beta of the firm's equity is 3.6.

c. The expected return on equity is 23% pa.

d. The firms after-tax WACC is 11.4% pa.

e. The beta of the firms assets is 2.1.

You expect market interest rates to fall, while the rest of the market believes there will be an increase. Which of the following statements about fixed-coupon bonds is most correct?

a. At the maturity date, regardless of changes in market interest rates, a bond price will be equal to the face value plus the coupon.

b. You should invest in short-term securities rather than long-term bonds.

c. You should sell your bonds before the drop in interest rates.

d. As the coupon rate is fixed, the interest rate change will have no impact on the bond.

e. Bond yields and prices are expected to fall