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ANSWER ALL QUESTIONS IN THIS PAPER Please write down the correct LETTER next to the relevant question number. Eg . 2 6 . F QUESTION
ANSWER ALL QUESTIONS IN THIS PAPER Please write down the correct LETTER next to the relevant question number. Eg F QUESTION Marks Which ONE of the following statements is TRUE? A In management accounting, reports tend to be generalpurpose useful to a wide range of users. B Debentures are short term debts for companies. C In financial accounting, objective and verifiable information is needed to prepare reports. D The interest rate on mortgage bonds is fixed. QUESTION Marks Shelford distributors normal credit terms to Landry Stores are days but is prepared to allow a discount if Landry Stores pays the account within days. Calculate the cost to Landry Stores of not accepting the discount. A B C D QUESTION Marks Which ONE of the following statements is FALSE? A A beta coefficient tells us how much systematic risk a particular asset has relative to an average asset. B A high beta coefficient means that the asset is heavily affected by market changes. C The Capital Asset Pricing Model CAPM allows investors to determine the required rate of return on a share, based on the risk associated with that share. D A low beta coefficient implies high variance. QUESTION Marks The cost of equity, RE for a company is If the company has a market return of and a beta factor of the risk free return is: A B C D QUESTION Marks Suppose a company, Scalar Solar Panels paid a dividend of R on the current market price and its preference share of R The cost of preference shares, RP is: A B C D QUESTION Marks If a firm is fixed in term of its assets and operations and it only considers possible changes in the debtequity ratio, the firm is following: A taxation theory. B variability theory. C debt theory. D static theory. QUESTION Marks Faadil holds of the shares R in Jacobs Limited. The new project has gone ahead, EPS is cents, and share price is R His investment is: A R B R C R D R QUESTION Marks A firm becomes bankruptinsolvent when the: A income generated is less than expenses. B profit is zero. C value of its debt is equal to the value of its income. D value of its assets is equal to the value of its debt. QUESTION Marks Which statement is TRUE? A In a spot trade, the transaction will be completed within months. B In a forward trade, there is an agreement to exchange currency at some time in the future. C Spot trade is equal to forward trade in terms of currencies. D Companies enter spot trades based on their opinion of where exchange rates are headed. QUESTION Marks Suppose you were expecting to receive a million New Zealand Dollars NZD in three months, and you agree to forward trade to exchange your NZDs for Rands. Assume that the spot exchange rate and the day forward rate in terms of Rand per NZD are R NZD and R NZD respectively. The premium relative of the NZD to the Rand is: A B C D QUESTION Marks The current war in Ukraine is an example of a: A local risk. B government intervention risk. C political risk. D variable risk. Questions refer to the problem below. Caleb Energy, South Africa, is a specialist manufacturer of inverters. In seeking to expand its operations, it is given the opportunity to acquire a Norwegian subsidiary company, OSLO International, or set up a new division in its home market. The relevant figures for these two options are given below: Set up new division at home: Rand Cost of setting up premises R Cost of machinery R Annual sales R Annual variable cost R Additional head office expenses R The project is expected to last for years. Caleb Energy, current cost of capital is Acquisition: Acquire shares from existing shareholders Krone Redundancy costs Krone Annual Sales Krone Annual variable costs Krone Annual fixed costs Krone Additional information: The Norwegian inflation is expected to be below the South African inflation by per year, throughout the life of this investment. The current exchange spot rate is R to the Krone. QUESTION Marks The annuity factor for setting up the new division at home is: A B C D QUESTION Marks The annual cash flow for setting up the new division at home is: A R B R C R D R QUESTION Marks The estimated amount of money made over the year period for setting up the new division at home is: A R B R C R D R QUESTION Marks The NPV for setting up the new division at home is: A R
ANSWER ALL QUESTIONS IN THIS PAPER
Please write down the correct LETTER next to the relevant question number. Eg F
QUESTION Marks
Which ONE of the following statements is TRUE?
A In management accounting, reports tend to be generalpurpose useful to a wide range of users.
B Debentures are short term debts for companies.
C In financial accounting, objective and verifiable information is needed to prepare reports.
D The interest rate on mortgage bonds is fixed.
QUESTION Marks
Shelford distributors normal credit terms to Landry Stores are days but is prepared to allow a discount if
Landry Stores pays the account within days. Calculate the cost to Landry Stores of not accepting the discount.
A
B
C
D
QUESTION Marks
Which ONE of the following statements is FALSE?
A A beta coefficient tells us how much systematic risk a particular asset has relative to an average asset.
B A high beta coefficient means that the asset is heavily affected by market changes.
C The Capital Asset Pricing Model CAPM allows investors to determine the required rate of return on a share, based
on the risk associated with that share.
D A low beta coefficient implies high variance.
QUESTION Marks
The cost of equity, RE for a company is If the company has a market return of and a beta factor of the
risk free return is:
A
B
C
D
QUESTION Marks
Suppose a company, Scalar Solar Panels paid a dividend of R on the current market price and its preference
share of R The cost of preference shares, RP is:
A
B
C
D
QUESTION Marks
If a firm is fixed in term of its assets and operations and it only considers possible changes in the debtequity ratio, the
firm is following:
A taxation theory.
B variability theory.
C debt theory.
D static theory.
QUESTION Marks
Faadil holds of the shares R in Jacobs Limited. The new project has gone ahead, EPS is cents, and
share price is R His investment is:
A R
B R
C R
D R
QUESTION Marks
A firm becomes bankruptinsolvent when the:
A income generated is less than expenses.
B profit is zero.
C value of its debt is equal to the value of its income.
D value of its assets is equal to the value of its debt.
QUESTION Marks
Which statement is TRUE?
A In a spot trade, the transaction will be completed within months.
B In a forward trade, there is an agreement to exchange currency at some time in the future.
C Spot trade is equal to forward trade in terms of currencies.
D Companies enter spot trades based on their opinion of where exchange rates are headed.
QUESTION Marks
Suppose you were expecting to receive a million New Zealand Dollars NZD in three months, and you agree to
forward trade to exchange your NZDs for Rands. Assume that the spot exchange rate and the day forward rate in
terms of Rand per NZD are R NZD and R NZD respectively. The premium relative of the NZD to
the Rand is:
A
B
C
D
QUESTION Marks
The current war in Ukraine is an example of a:
A local risk.
B government intervention risk.
C political risk.
D variable risk.
Questions refer to the problem below.
Caleb Energy, South Africa, is a specialist manufacturer of inverters. In seeking to expand its operations, it is given
the opportunity to acquire a Norwegian subsidiary company, OSLO International, or set up a new division in its home
market. The relevant figures for these two options are given below:
Set up new division at home:
Rand Cost of setting up premises R
Cost of machinery R
Annual sales R
Annual variable cost R
Additional head office expenses R
The project is expected to last for years. Caleb Energy, current cost of capital is
Acquisition:
Acquire shares from existing shareholders Krone
Redundancy costs Krone
Annual Sales Krone
Annual variable costs Krone
Annual fixed costs Krone
Additional information: The Norwegian inflation is expected to be below the South African inflation by per year,
throughout the life of this investment. The current exchange spot rate is R to the Krone.
QUESTION Marks
The annuity factor for setting up the new division at home is:
A
B
C
D
QUESTION Marks
The annual cash flow for setting up the new division at home is:
A R
B R
C R
D R
QUESTION Marks
The estimated amount of money made over the year period for setting up the new division at home is:
A R
B R
C R
D R
QUESTION Marks
The NPV for setting up the new division at home is:
A R
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