Reference no: EM133047078

Questions -

Q1. The minimum cash balance of $ 10,000 is required at Company ABC and transferring money to or from the bank costs $ 30 per transaction. Inspection of daily cash flows over the past year suggests that the standard deviation is $ 3,000 per day and variance is $4 million. The interest rate is 0.05%per day. The return point is:

a. 26,938.7

b. 16,938.7

c. 30,724.7

d. 15,646.23

Q2. Which of these statements is correct?

a. The tax shield increases the WACC and reduces value

b. The tax shield reduces the WACC and reduces shareholder value

c. The tax shield increase the WACC and increase shareholder value

d. The tax shield reduces the WACC and increases shareholder value

Q3. Rainbow plc requires an initial investment of £ 100,000. It expects to generate £25,000 in Year 1, £30,000 in Year 2, and £40,000 in Year 3 and £40000 in Year 4. The cost of capital is 14%. What is the MIRR of that investment?

a. 16%

b. 14%

c. 7.6%

d. 13%

Q4. Under the CAPM the required return on a share with a beta of 1.2, when the risk-free rate of return is 7.25% and the risk premium on the average share over a long period of time has been 8%, is:

a. 16.7%

b. 18.3%

c. 16.85%

d. 15.25%