Question 1

Calculate the after-tax cash inflows expected from the an-amortized portion of the old bond's issuance cost.

Question 2

b) Calculate the annual after-tax cash inflows from the issuance of the new bondsassuming the 10-year amortization. (2 marks)

Answer

Question 3

Calculate the after-tax cash outflow from the call premium required to retire the old bonds.

Question 4

Determine the incremental initial cash outlay required to issue the new bonds.(10mks)

Question 5

Calculate the annual cash-flow savings, if any, expected from the bond refunding. (8 marks)

Question 6

If the firm has a 14% after-tax cost of debt, would you recommend theproposed refunding and reissue? Explain. (4 marks)

Question 7

Discuss the main features of:

(i) Corporate share repurchases (buy-backs); and

(ii) Share (stock) splits;

and why companies might use them. Include in your discussion comment on the possible effects on share price of share repurchases and share (stock) splits in comparison to the payment of dividends.

Question 8

Discuss how government actions can influence the tasks of the financial manager and explain how these actions can affect the attainment of financial objectives.(20 marks)

Question 9

Justify and criticize the usual assumption made in financial management literature that the objective of a company is to maximize the wealth of its shareholders.(20 marks)

10. Let two duopsonists have production functions = . and = . where x₁, x₂ are the input levels employed by the duopsonists. Assume that the input supply function is r = 2 + 0.1(x₁ + x₂) where r is the supply price of the input, and that q₁ and q₂ are sold in competitive markets for prices p₁ = 2 and p₂ = 3. (a) Find the input reaction functions.

(b) Determine the Cournot equilibrium values for x₁, x₂, and q₁, q₂, ,