The following regression output shows the returns relationship between MeLap Limited and the JSE ALSI.

SUMMARY OUTPUT Regression Statistics Multiple R0.5630 R Square0.3169 Adjusted R Square0.3049 Standard Error0.1062 Observations59.0000 ANOVA dfSSMSFSignificance F Regression10.29840.298426.44680.0000 Residual570.64310.0113 Total580.9415 CoefficientsStandard Errort StatP-valueLower 95%Upper 95%Lower 95.0%Upper 95.0%Intercept-0.00190.0139-0.13970.8894-0.02990.0260-0.02990.0260JSE1.29800.21355.14260.00000.67051.52560.67051.5256

From the regression oputput, what is the beta of MetLap Limited and what does it imply?

The beta is - 0.0019. This means MetLap is less risky than the market The beta is 1.2980. This means MetLap is riskier than the market The beta is - 0.0019. This means MetLap is riskier than the market The beta is 1.2980. This means MetLap is less risky than the market

Bella Huys is the new CEO of MetLap Limited. She believes that the sole focus on maximising value for shareholders led to a very short-sighted approach of focusing on the share price of the company to the detriment of improving the fundamentals of the company by investing in profitable and sustainable projects. The former CEO was ousted because he was found guilty of providing misleading information to the market to shore up the share price of the company. Ayanda believes a focus on profitability will be a more suitable object.

Which of the following statements is CORRECT based on the scenario provided?

A focus on profitability can also reslut in short-term decisions Profits can be measured and verified from the financial statements so there is no room for providing misleading information A focus on profitablility will automatically shift the company's focus to long-term growth and sustainability If the focus on profit maximisation is restated in terms of accounting returns (such as return on equity or capital) it will remove all elements of subjectivity in estimating profitability

The Dividend Principle of corporate finance states that:

Dividends payments should be made at the highest possible rate without jeopardising the growth of the company Reinvesting retained earnings should be prioritised if it grows the market share of the company If there are not enough investments that earn the hurdle rate, return the cash to the shareholders The dividend if the dividends yield is lower than the yiled on government bonds, value is maximised for share holders if shareholders choose a dividend reinvestment option.

Which of the following statements is CORRECT?

i. The objective of maximising wealth for shareholders implicitly assumes that the social side costs are trivial enough to be ignored

ii. The objective of maximising wealth for shareholders implicitly assumes that the social side costs can be priced and charged to the firm.

iii. The objective of maximising wealth for shareholders is the only objective that a for-profit company can focus on

iv. The conflicts between the interests of the firm and the interests of society are only restricted to the objective of maximising wealth for shareholders

i and ii only i, ii, iii and iv i, ii, and iii only i, ii and iv only

If the yield on the 10-year rand-denominated South African government bond is 9% and the default spread is 2.5%. What is the risk-free rate?

3.6% 11.5% 6.5% 9%

The regression output below shows the returns relationship between MetLap Limited and the JSE ALSI.

SUMMARY OUTPUT Regression Statistics Multiple R0.5630 R Square0.3169 Adjusted R Square0.3049 Standard Error0.1062 Observations59.0000 ANOVA dfSSMSFSignificance F Regression10.29840.298426.44680.0000 Residual570.64310.0113 Total580.9415 CoefficientsStandard Errort StatP-valueLower 95%Upper 95%Lower 95.0%Upper 95.0%Intercept-0.00190.0139-0.13970.8894-0.02990.0260-0.02990.0260JSE1.29800.21355.14260.00000.67051.52560.67051.5256

From the regression output, how much of the variability in the returns of MetLap Limited is due to firm-specific risk of MetLap Limited?

32% 68% 79% 21%

The following regression output shows the return relationship between MeLap Limited and the JSE ALSI using monthly returns data.

SUMMARY OUTPUT Regression Statistics Multiple R0.5630 R Square0.3169 Adjusted R Square0.3049 Standard Error0.1062 Observations59.0000 ANOVA dfSSMSFSignificance F Regression10.29840.298426.44680.0000 Residual570.64310.0113 Total580.9415 CoefficientsStandard Errort StatP-valueLower 95%Upper 95%Lower 95.0%Upper 95.0%Intercept-0.00190.0139-0.13970.8894-0.02990.0260-0.02990.0260JSE1.29800.21355.14260.00000.67051.52560.67051.5256

From the regression output, which of the following statements is TRUE if the monthly risk-free rate is 0.4%?

MetLap underperforms the market Metlap outperforms the market Metlap performs just as expected by CAPM Information on perfomance cannot be determined from the regression output

Which of the following statements describes the Financing Principle in traditional corporate finance?

Choose a financing mix that maximises profits for the company Choose projects that yield a return greater than the minimum acceptable hurdle rate. If there are not enough investments that earn the hurdle rate, return the cash to the shareholders Choose a mix of debt and equity that maximises value for shareholders