Finance Quiz

- 1 of 3   ID: FMTH.CC.WACC.08A

The following data applies to Betty's Brilliant Boats Ltd (BBB).

Debt	Equity
market value of debt = $339,909 (nearest dollar)	market value of equity = $475,659 (nearest dollar)
time to maturity of debt = 13 years	current dividends = $3.26 per share (assumed constant)
coupon rate = 12.8% pa paid semi-annually	BBB share price = $19.96
face value = $200,000

Answer the following questions based on the information in the table. Ignore the effect of taxes.

a)Calculate the cost of debt for BBB. You may give your answer as a percentage per annum to the nearest percent or use linear interpolation or a financial calculator to give a more accurate result.

Cost of debt = % pa

b)Calculate the cost of equity for BBB. Give your answer as a percentage per annum to 1 decimal place.

Cost of equity = % pa

c)Calculate the weighted average cost of capital for BBB. Give your answers as a percentage per annum to 1 decimal place.

Weighted average cost of capital = % pa

[3  marks] -  2 of 3   ID: FMTH.CC.WACC.07A

The following data applies to Micro Advanced Developers (MAD).

Debt	Equity
market value of debt = $84,899	market value of equity = $24,599
time to maturity of debt = 13 years	risk free rate = 4.5% pa
coupon rate = 6.2% pa paid semi-annually	market risk premium = 3.9% pa
face value = $100,000	DDD beta = 1.09

As a financial manager you have been given the task of calculating the company's weighted average cost of capital (WACC). Ignore the effect of taxes.

a)Firstly, you realise that the cost of debt is needed. Calculate the cost of debt for MAD. You may give your answer as a percentage per annum to the nearest percent or use linear interpolation or a financial calculator to give a more accurate result.

Cost of debt = % pa

b)Secondly, the cost of equity must also be identified. Calculate the cost of equity for MAD. Give your answer as a percentage per annum to 1 decimal place.

Cost of equity = % pa

c)Finally, calculate the weighted average cost of capital for MAD. Give your answer as a percentage per annum to 1 decimal place.

Weighted average cost of capital = % pa

 3 of 3   ID: FMTH.CC.CE.02A

Premiere Software Ltd earned $2.30 per share in net profit when the price of a share in the Premiere Software Ltd was $23. As a result of a major adverse change in the market for the company's product, investors do not expect Premiere Software Ltd to maintain the present level of earnings in future.

A possible price earnings multiple for Premiere Software Ltd is now:

	10
	9
	11

14329047067929

71156178703384

28040924244820

97292989301942

73511570018390

29322735484439