Financial Management for Decision Makers 8th. Edition by Peter Atrill | 9781292134338 | 129213433X | Holooly

Financial Management

Financial Management for Decision Makers

395 SOLVED PROBLEMS

Question: 8.2

Danton plc has 10 million ordinary shares in issue with a current market value of £2.00 per share. The expected dividend for next year is 16p per share and this is expected to grow each year at a constant rate of 4 per cent. The business also has: ■ 10.0 million 9 per cent £1 irredeemable ...

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The first step is to calculate the cost of the ind...

Question: 12.SE.6

Larkin Conglomerates plc owns a subsidiary, Hughes Ltd, which sells office equipment. Recently, Larkin Conglomerates plc has been reconsidering its future strategy and has decided that Hughes Ltd should be sold off. The proposed divestment of Hughes Ltd has attracted considerable interest from ...

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Larkin Conglomerates plc (a) The value of an ordin...

Question: 12.SE.4

The directors of Simat plc have adopted a policy of expansion based on the acquisition of other businesses. The special projects division of Simat has been given the task of identifying suitable businesses for takeover. Stidwell Ltd has been identified as being a suitable business and negotiations ...

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Simat plc (a) Calculating the value per share of S...

Question: 8.A.12

Iordanova plc has 12 per cent irredeemable preference shares in issue with a nominal (par) value of £1. The shares have a current market price of £0.90 (excluding dividends). What is the cost of these shares? ...

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The cost is:

K_{p} = \frac{D_{p}}{P_{p}}[/l...

Question: 8.A.11

Calculate the pre-tax cost of loan capital for Lim Associates plc. (Hint: Start with a discount rate of 10 per cent.) ...

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Using a discount rate of 10 per cent, the NPV is c...

Question: 8.1

Lim Associates plc issues £20 million loan capital on which it pays an annual rate of interest of 10 per cent on the nominal value. The issue price of the loan capital is £88 per £100 nominal value and the tax rate is 20 per cent. The loan capital is due to be redeemed in four years’ time at its ...

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The cash flows for this issue of loan capital will...

Question: 8.A.10

Tan and Co plc has irredeemable loan capital outstanding on which it pays an annual rate of interest of 10 per cent. The current market value of the loan capital is £88 per £100 nominal value and the tax rate is 20 per cent. What is the cost of the loan capital to the business? ...

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Using the above formula, the cost is:

K_{d}...

Question: 8.A.9

Can you recall why this is the case? ...

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If earnings are reinvested by the business, the sh...

Question: 8.A.8

Why do you think this is? ...

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In the absence of information concerning returns t...

Question: 8.A.7

Lansbury plc has recently obtained a measure of its beta from a business information agency. The beta value obtained is 1.2. The expected returns to the market for the next period is 10 per cent and the risk-free rate on government securities is 3 per cent. What is the cost of ordinary shares to ...

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Using the CAPM formula we have: K0 = KRF + b(Km - ...

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