Use the below information to value the debt in a levered company with annual perpetual cash flows from assets that grow. The next cash flow will be generated in one year from now.

Data on a Levered Firm with Perpetual Cash Flows

Item abbreviation	Value	Item full name
FFCF (millions)	$30.5	Firm free cash flow (or Cash Flow from Assets)
g	2% pa	Growth rate of OFCF
rD	3% pa	Cost of debt
rEL	6% pa	Cost of levered equity
D/VL	35% pa	Debt to assets ratio, where the asset value includes tax shields
tc	30%	Corporate tax rate

The current value of debt is

a. 405.12

b. 1157.5

c. 446.63

d. Also 361.86

e. 672.03

A firm pays a fully franked cash dividend of $200 to one of its Australian shareholders who has a personal marginal tax rate of 25%. The corporate tax rate is 30%. What will be the shareholder's personal tax payable due to the dividend payment?

a.85.7143

b.50

c.71.4286

d.-14.2857

e.-10

A company conducts the following capital payout and raising policies. Assume that there are no taxes, no signalling effects and no transaction costs. Which one of the following statements is NOT correct?

a.1 for 8 rights issue at a subscription price of $6 when the pre-announcement stock price was $9, will increase the number of shares by 12.5% and decrease the share price by 4.44%.

b.25% stock buy-back will decrease the number of shares by 25%.

c.4 for 3 stock split will increase the number of shares by 33.33% and decrease the share price by 25%.

d.After cash dividend, normally the share price will fall.

e.1 for 5 bonus issue will increase the number of shares by 20% and decrease the share price by 16.67%.

A bank quotes an interest rate of 9% pa with quarterly compounding. Note that another way of stating this rate is that it is an annual percentage rate (APR) compounding every quarter. Which of the following statements about this rate is NOT correct? All percentages are given to 5 decimal places.

a.

Continuously compounded quarterly rate is 2.22506% per quarter.

b.

The annual percentage rate (APR) compounding every month is 8.93333%.

c.

Effective quarterly rate is 2.25000% per quarter.

d.

Effective monthly rate is 0.64756% per month.

e.

Continuously compounded semi-annual rate is 4.45012% per half year.

The below three graphs show probability density functions (PDF) of three different random variables Red, Green and Blue. Let P1 be the unknown price of a stock in one year. P1 is a random variable. Let PO=1, so the share price now is $1. This one dollar is a constant, it is not a variable. frequency 0,6 Red/ 0.5 0.4 0.3 Blue Green 0.2 0.1 -2 -1 0 1 2 variable 3 Which of the below statements is NOT correct? a. Green is a stock's continuously compounded return. O b. Blue is a stock's gross discrete return (GDR), with a minimum value of zero. O c. Blue is a stock's future price (P1), with a minimum value of zero. O d. Red is a stock's log gross discrete return (LGDR), with a minimum value of negative one. O e. Red is log-normally distributed, and the mean is higher than the median