The questions are as follows:

$1\mathrm{.}1$ Which THREE of the following strategies are most likely to increase shareholders' wealth?

I Investing in projects with a positive net present value.

II Moving profitable operations to low$-$tax regimes.

III Enhanced brand reputation and recognition.

IV Increasing the rate of dividend growth.

V Increasing director bonuses.

Choose the correct answer: $(2)$

A I, II and III

B I, III and V

C I, IV$,$ and V

D III, IV and V

$1\mathrm{.}2$ Blue $($Pty$)$ Ltd$,$ a manufacturing company, has applied to borrow R $35$ million from its bank to invest in a new production line.

Which THREE of the following characteristics of Blue $($Pty$)$ Ltd are likely to be viewed positively by the bank?

I There is a single supplier of raw materials

II Its order book is clear after the next two months

III It is all equity$-$financed

IV It has a wide range of well$-$established products

V It has a good reputation for paying payables on time

Choose the correct answer: $(2)$

A I, II and III

B I, III and IV

C II$,$ III and IV

D III, IV and V

The following short case study relates to questions $1\mathrm{.}3\mathrm{.}1$ and $1\mathrm{.}3\mathrm{.}2$:

Cherry Ltd is based in country C$,$ where the functional currency is the C$$.$ Cherry Ltd sells some products in various European countries, denominated in Euro $($EUR$).$ Sales in $1$ year$$s time are expected to be EUR $400000.$

The current spot rate is C$$/$EUR $12\mathrm{.}50($that is C$ $1=$ EUR $12\mathrm{.}50).$ Interest rates in Europe and country C are expected to be $6\%$ and $10\%$ respectively over the next year.

The financial director of Cherry Ltd is attempting to estimate the likely exchange rate in $1$ years$$ time, to assess the likely value of the entity$$s foreign currency income.

$1\mathrm{.}3\mathrm{.}1$ What is the expected exchange rate in $1$ year$$s time, using the interest rate parity theory? $(2)$

A C$$/$EUR $7\mathrm{.}50$

B C$$/$EUR $12\mathrm{.}05$

C C$$/$EUR $12\mathrm{.}46$

D C$$/$EUR $12\mathrm{.}97$

$1\mathrm{.}3\mathrm{.}2$ What is the expected value of the EUR sales, when translated into C$$?(1)$

A C$ $32000$

B C$ $33195$

C C$ $3083636$

D C$ $3210191$

$1\mathrm{.}4$ Drop Ltd$$s shares currently sell at R$10\mathrm{.}00$ each. Drop Ltd plans to make a rights issue of one share at R$8\mathrm{.}00$ for every three existing shares.

What is the theoretical ex$-$rights price of the shares after the issue? $(3)$

A R $6\mathrm{.}00$

B R $9\mathrm{.}50$

C R $12\mathrm{.}40$

D R $13\mathrm{.}33$

$1\mathrm{.}5$ Leptos Ltd required funding for a new project and is considering a rights issue to raise the required R$20000000.$ Leptos Ltd currently has $10$ million R$1$ shares in issue, trading at R$12\mathrm{.}50.$

The directors believe that a discount of $20\%$ will be required to encourage investors to take up their rights.

What should the terms of the rights issue be$?(2)$

A $1$ for $4$

B $1$ for $5$

C $1$ for $8$

D $1$ for $10$

$1\mathrm{.}6$ If the exchange rate moves from ZAR $1=$ US Dollar $0\mathrm{.}049$ to ZAR $1=$ US Dollar $0\mathrm{.}056,$ then the South African Rand has $...(1)$

A appreciated and South Africans will find US goods cheaper.

B appreciated and South Africans will find US goods more expensive.

C depreciated and South Africans will find US goods cheaper.

D depreciated and South Africans will find US goods more expensive.

$1\mathrm{.}7$ Mozza $($Pty$)$ Ltd have provided the following information pertaining to their net profit and dividends:

Profit and dividend information

Mozza $($Pty$)$ Ltd

Year

Net profit

Dividends

R$000$

R$000$

$2019$

$608$

$333$

$2020$

$705$

$364$

$2021$

$658$

$373$

$2022$

$762$

$449$

$2023$

$871$

$487$

$2024$

$966$

$547$

What is Mozza $($Pty$)$ Ltd$$s compound annual growth in dividends since $2019,$ based on the information provided $($to the nearest $0\mathrm{.}1\%)?(2)$

A $8\mathrm{.}6\%$

B $9\mathrm{.}7\%$

C $10\mathrm{.}1\%$

D $10\mathrm{.}4\%$

$1\mathrm{.}8$ The following information related to Rella Ltd:

Current cost of equity is $11\%$

Ungeared cost of equity is $7\%$

WACC is $6\mathrm{.}63\%$

Market value of:

$$ Equity is R $50$ million

$$ Debt is R $12$ million

Tax rate is $27\%$

Rella Ltd is planning to raise R $8$ million of debt to repurchase shares.

According to Modigliani and Miller$$s theory with tax, what would the WACC move to$?(3)$

A $5\mathrm{.}92\%$

B $6\mathrm{.}24\%$

C $6\mathrm{.}41\%$

D $10\mathrm{.}07\%$

$1\mathrm{.}9$ Yellow Ltd has $12$ million shares in issue, trading at R$6\mathrm{.}00$ per share. The directors have decided to offer a $1$ for $3$ scrip dividend to shareholders.

What will the company's share price be after the scrip dividend has been issued? $(2)$

A R $2\mathrm{.}00$

B R $3\mathrm{.}00$

C R $4\mathrm{.}50$

D R $18\mathrm{.}00$

$1\mathrm{.}10$ Heinz is a German company, which is a wholly owned subsidiary of Sabre, a company resident in France.

Heinz borrows $2000000$ from Sabre paying a market rate of interest of $5\%.$ Heinz had to borrow from Sabre as its German bankers were not prepared to lend it more than $1400000.$

With reference to thin capitalisation, how much interest on borrowings is Heinz likely to have relieved $($allowed as a deduction$)$ for tax purposes? $(3)$

A $$ Nil

B $30000$

C $70000$

D $100000$