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Hey
Just wondering if you can help me with a couple questions, just found this site, a little too late unfortunately!
1. BI has in issue 8% irredeemable bonds quoted @ 86% ex. int. rate of corp tax 25%
calculate cost of debt?
Ans 6.98%2. LJM considering investing in a new project, cost 160k. expected life 4 yrs, scrap 20k. anticipated c/f year 1 40k year 2 60k year 3 80k and year 4 20k
cost of capital 10%
calculate ARR(accounting rate of return)?
Ans: 16.67%3. Forecast sales 200,000 and will increase 5% each month. All sales are credit, 60% pay after 1 month and rest after 2 months. Calculate receipt budgeted for May?
Ans $204,0004. AJT gearing ratio (Debt: Debt+Equity) of 30% & pays CT 30%. Has asset (ungeared) beta of 1.2 Rf 5% Erm 12% calculate cost of equity?
I know you may not be able to answer all these for me as you have so many queries to answer. I have gone through a lot of the topics but can’t find these ones. You mentioned free lectures on topics but couldn’t find these either?
Thanks for any help, I am really struggling with this subject 🙁
If you go the main F9 page, there are free lectures covering the whole of the F9 syllabus (including what is asked in all the questions above!)
1: (8 x 75%) / 86 = 6.98% (this is covered in the lectures on cost of capital)
2: total cash receipts = 200; total depreciation = 140. Therefore total profit = 60; therefore average profit = 15 per year.
Average investment = (160 + 20)/2 = 90
So ARR = 15/90 = 16.67%
(This is covered in the section on investment appraisal)3: The receipt in May will be 60% of April’s sales plus 40% of March’s sales.
(This is covered in the lectures on working capital management)4: You use the asset beta formula (backwards) to calculate the equity beta. So the equity beta = 1.2 x (70 + (30 x 70%)) / 70 = 1.56
You then use the equity beta in the normal CAPM formula to get the cost of equity.
(This is all covered in the lectures on CAPM)
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beta plc pay dividend $ .40 per share. dividend growth is 5% per annum share holder required rate of return is 20%. what is current market value
Please do not ask the same question in two different places. I have just answer the other identical question you posted!!
Thanks john. I figured a few of them out over the weekend after more digging through this website. It’s been a lot of help. Thanks again!
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