INCOME BASED VALUATION

11. With risk-free rate of 5%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, compute for the weighted average cost of capital.

a 6.00%

b. 6.77%

C 7.00%

d. 7.77%

12 With risk-free rate of 6%, Beta of 1.5, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, Using CAPM method compute for the cost of equity

a. 9.00%

b. 6.77%

C. 8.00%

d. 8.77%

13. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, compute for the volatility of stocks or Beta.

a. 1.00

b. 1.25

c. 1.50

d. 1.75

14. The appropriate WACC of a firm is 6.43%. With risk-free rate of 4%, market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, compute for the after tax cost of debt

a 4.90%

b. 5.00%

c. 7.00%

d. 10.00%

15. SPPE Corp. is planning to expand and new projects is expecting to earn an average of Php375,000 annually. If the project requires for Php5,000,000 investment at 10% cost of capital. Compute for the Economic Value Added.

a. Php 125,000.00

b. (Php 125,000.00)

c. Php 875,000.00

d. (Php 875,000.00)

16. SLAC Corp. is planning to expand and new projects is expecting to earn an average of Php750,000 annually. If the project requires for Php5,000,000 investment at 12% cost of capital. Compute for the Economic Value Added.

a Php 150,000.00

b. (Php 150,000.00)

c Php 600,000.00

d. (Php 600,000.00)

17. SPRO Corp is planning to expand and new projects is expected to have an EVA of Php200,000.00. The annual cost of capital at 10% amounts to Php400,000.00. What is the average monthly earning projected for this project?

a. Php 600,000.00

b. Php 50,000.00

c. Php 60,000.00

d. Php 500,000.00

18. SLMA Corp. for the last ten years, has earned and had cash flows of about P600,000 every year. As per the predictions of the company's earnings, the same cash flow would continue for the foreseeable future. The expenses for the business every year is about P500,000 only. Based on the available public information a P4 million Treasury bond has a prevailing return of P40,000 quarterly. Using Capitalization of Earnings approach, assuming SLMA would sell 20% of its shareholdings, what will be the minimum selling price?

a. Php 2,500,000.00

b. Php 500,000.00

c. Php 1,500,000.00

d. Php 1,000,000.00

19. SPLI, Inc. has a Debt to Equity Ratio of 31. After tax cost of debt is 5% while cost of equity is 10%. The Board of Directors of the company decided to sell 100% of the company for Php 1 Billion. Compute for the projected monthly average earnings assuming an EVA of Php 57,500,000.00

a. Php 37,500,000.00

b. Php 10,000,000.00

c. Php 120,000,000.00

d. Php 100,000,000.00

20. The appropriate WACC of a firm is 6.77%. With market return of 8%, prevailing credit spread of 3%, tax rate of 30% and Equity ratio of 30%, what is the risk free rate of the firm with Beta of 1.5?

a. 4%

b. 5%

c. 6%

d. 7%