QUESTION 7

The JB Cos. has a capital structure of 78 percent equity, a 22 percent debt and the before-tax cost of debt is 11 percent, while its cost of equity is 15 percent. If the appropriate weighted-average tax rate is 25 percent, identify what JB's WACC will be.

[5 marks]

QUESTION 8

Using examples, assess what capital rationing is and its relationship to the net present value.

[5 marks]

QUESTION 9

Discuss the meaning of the term ' synergy' for egrporate acquisition.

[5 marks]

QUESTION 10

Regarding the options, evaluate the difference between at-the-money and out-the-money?

[5 marks]