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Exam (elaborations)

Fin2603 Assessment 2 Sem 2 Of 2024 Expected Questions And Answers

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THIS DOCUMENT CONTAINS FIN2603 ASSESSMENT 2 SEM 2 OF 2024 EXPECTED QUESTIONS AND ANSWERS.USE IT AS A GUIDE AND FOR PRACTICE TOSCORE ABOVE 80%

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OSCAR THE TUTOR
Started on Saturday, 24 August 2024, 11:33 AM
State Finished +27737560989
Completed on Saturday, 24 August 2024, 11:57 AM for FAC MAC ECS DSC TAX QMI FIN
INV BNU STA tutorials
Time taken 24 mins 18 secs

Question 1 A company increasing its credit terms for customers from 2/15 net 60 to 2/18 net
Complete 75 will likely experience ...
Marked out of
1.00
a. a decrease in the average collection period.
Flag
question b. an increase of cash in hand.
c. an increase in the average collection period.
d. higher net income.




Question 2 The after-tax cost of debt for a firm which has a marginal tax rate of 40%, is 6%.
Complete Calculate the before-tax cost of debt.
Marked out of
1.00
a. 8.1%
Flag
question b. 10.0%
c. 6.0%
d. 9.2%




Question 3 A company has financed 40% of its assets through a 12% after-tax cost of debt
Complete loan. The remainder of its assets are financed through equity. The firm’s required
Marked out of
return on equity is 14%.
1.00 Calculate the company's weighted average cost of capital (WACC)?
Flag
question a. 13.75%
b. 13.20%
c. 13.56%
d. 15.50%




A firm has a loan with an interest rate of 15%. The firm is subject to a tax rate of
30%.
Calculate the firm’s after-tax cost of debt?

a. 15.0%
b. 22.5%

, c. 10.5%
Question 4
Complete d. 4.5%
Marked out of
1.00

Flag
question




Question 5 Calculate the present value (PV) of R100 000 received 9 years from today at an
Complete interest rate of 12%.
Marked out of
1.00
a. R36 061
Flag
question b. R27 895
c. R37 980
d. R43 998




Question 6 Clearwater Ltd. has determined its optimal capital structure, which comprises the
Complete following:
Marked out of
1.00 FORM OF CAPITAL WEIGHT AFTER-TAX COST
Long-term debt 70% 4%
Flag
question Preference shares 20% 13%
Ordinary shares 10% 10%

The weighted average cost of capital is ...

a. 9.1%
b. 8.4%
c. 6.4%
d. 5.3%




Question 7 The financial manager is evaluating a proposal for a new project with a cost of
Complete capital of 13.5%.
Marked out of
1.00 The cash flows for the project are estimated as follows:
Year Net cash flows
Flag
question 0 -R 1 000 000
1 R 650 000
2 R 450 000
3 R 350 000

The IRR is ...

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