代写BUSI4567 CORPORATE FINANCIAL MANAGMENT代做留学生SQL 程序

BUSI4567-E1

A LEVEL 4 MODULE, AUTUMN SEMESTER 20xx-20xx

BUSI4567 CORPORATE FINANCIAL MANAGMENT

Question 1

(a)   Compare the advantages of debt financing over equity financing when a corporation is issuing a bond to raise capital for projects. 10 marks

(b)   What are credit ratings for bonds? How the credit ratings affect the yields of bonds? 10 marks

(c)   You are required to price a Treasury bond with a coupon rate of 4% and paid annually. The par value of the bond is $1,000. The maturity of the bond is 3 years.

i.    State the principles of bond valuation. 8 marks

ii.    What  is the  price of the  bond when the yield to  maturity  of the  bond  is 6% annually? 7 marks

iii.    What is the cost of debt capital when the yield to maturity is 6%? Elaborate your answer. 8 marks

iv.    What  is the  relation  between  bond prices and interest rates? Use a diagram to illustrate the relationship between them. 7 marks

Total 50 marks

Question 2

The expected return for the US stock market is 8.0 percent per annum and the expected risk- free rate is 3 percent. The following information is available for each of five stocks:

(a)   Calculate the expected return per annum for each of the five stocks 10 marks

(b)   Calculate the market risk premium. What does it represent? 6 marks

(c)    Using the CAPM to assess which stocks are undervalued and which are overvalued; 14 marks

(d)   What will result in an efficient market if a stock is incorrectly valued?  Explain  the process by which this error will be corrected, using the five stocks above to illustrate. 10 marks

(e)   Identify  the  basic  difficulties with using CAPM to calculate required rate of return on assets. 10 marks

Total 50 marks

Question 3

Company Smiths Group has 60 million shares outstanding with a market price of $5 and no  debt. The beta of its equity is 1.5 . The rate of return of the risk free asset is 3% annually.  The rate of return on the market is 6% annually. Smiths Group has had consistently stable  earnings. The company pays at a 35% tax rate. Management plans to borrow a permanent  debt of $100 million to replace $100 million of equity. (Assume MM theory with tax is correct) :

(a)   What  is  the   required  rate  of  return   by  shareholders   before  the   issuance  of  the permanent debt? 4 marks

(b)   If the cost of debt is 3%. What is the required rate of return by shareholders after the debt financing? 5 marks

(c)   What are the Weighted Average Costs of Capital  (WACC) for the company before and after the debt financing? 7 marks

(d)   What are the values of the firm before and after the debt financing? 7 marks

(e)   What are the values of the equity before and after the debt financing? 8 marks

(f)    Who will benefit from this debt financing and by how much? 7 marks

(g)   To what extent the MM theory with tax is reasonable? Discuss. 12 marks

Total 50 Marks

Question 4

(a)   Suppose the current dividend for ABC Company is £1.40. Shareholders require a  12% rate of return on the company and its dividend increases by 4% every year forever in the future. What is the price of ABC’s stock today? 10 marks

(b)   Briefly comment on the following statement:

“Companies should always prefer to repurchase stocks rather than paying dividend

because stock repurchase could reduce the number of shares and increase earnings per share.” 10 marks

(c)   Discuss and analyse the controversy on the effects of dividend policy in the real world. 30 marks

Total 50 marks

Question 5

(a)   An investment of £500 will generate one of two outcomes: £400 in one year and £500 in two years OR £350  in  one year and £300  in two years.  Each outcome  has a  50% probability. The discount rate is 15%.

i.    What is the expected NPV of the investment? 10 marks

ii.    Assume you have an option to abandon in one year for £300. If you abandon, you keep that as the year one cash flow and give up the year two cash flow. Is the abandonment rational for either outcome? What is the NPV of the investment assuming rational abandonment and the value of the abandonment option? 10 marks

(b)   Describe four types of real options often encountered in investment opportunities. 10 marks

(c)   Identify the  problems of the discounted cash flow (DCF) analysis for valuing a project and explain the reasons that managers might use real options analysis. 20 marks

Total 50 marks

Question 6

(a)   Briefly define and discuss the following theories on the merger and acquisition phenomena:

i.    Synergy hypothesis

ii.    Agency theory (e.g., Hold-up problems) 8 marks

(b)   What are main objectives of horizontal acquisitions, vertical acquisitions and conglomerate acquisitions respectively? 10 marks

(c)   The Company Oriental Express is investigating a possible merger with Company EuroToys. The below is basic financial information about the two companies:

Both Oriental Express and EuroToys are mature firm will be $225 million. Oriental Express plans merger.

i.    What is the synergy of the merger? 5 marks

ii.    Where does the synergy come from? 8 marks

iii.    What is the cost to Oriental Express? 5 marks

iv.    What are the gain and stock price change of Oriental Express? 8 marks

v.    What are the gain and stock price change of EuroToys? 6 marks

firms. The market value of the merged to pay EuroToys $64 million for the

Total 50 marks