Question 1 Provident Ltd. has announced a fully franked dividend of $1 per share. The company tax rate is 30 percent. By how much should the share price fall on the ex-dividend date if 'franking credits' are OF NO valued? A)$1.00 C) $0.43 D) None of the above Question 2 A firm owns an asset B and it wants to hedge against changes in the value of B by making an offsetting sale of asset A. The firm minimizes risk if: A) Selling the same number of units of A as assets of B B) Selling the hedge ratio (delta) number of units oflB C) Selling the reciprocal of hedge ratio number of units of A. D) None of the above Question 3 Companies X and Y are valued as follows Number of shares outstanding Earnings per share (EPS) Share Price per share 4000 $20 $200 2000 $20 $100 Company X now acquires Y by offering one (new) share of X for every two shares of Y (that is, after the merger, there are 2500 shares of X outstanding). If investors are aware that there are no economic gains from the merger, what is the price-earnings (P/E) ratio of X's stock after the merger? A)7.5 B) 8.3 C) 10.0 D)5.0