Which one of the following statements is correct? If NPV is positive, IRR will be less than required rate of return If NPV = 0, IRR is equal to the required rate of return If NPV is positive, IRR is equal to the required rate of return If NPV is negative, IRR will be greater than the required rate of return None of the above
Answer the following multiple choice questions
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Which one of the following statements is correct?
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If NPV is positive, IRR will be less than required
rate of return -
If NPV = 0, IRR is equal to the required rate of return
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If NPV is positive, IRR is equal to the required rate of return
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If NPV is negative, IRR will be greater than the required rate of return
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None of the above
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- Durr Ham plc currently has 80 million shares outstanding priced at £2 each. A dividend of 10p has just been paid and is expected to grow steadily by 5% per annum. The company has 1 million bonds outstanding, trading at £50 each, and with a yield to maturity of 9%. The company pays corporate tax at a rate of 22%.
What is the firm’s weighted average cost of capital (WACC)?
- 9.5%
- 4.7%
- 9.0%
- 10.0%
- None of the above
3. Globex Corporation plc shares are currently trading at $5.00 each. Management wishes to raise capital to expand the business and announces a rights issue. Existing shareholders will be given the right to purchase one share at $3.00 for each three shares currently held. Which of the following statements is correct?
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The ex rights share price is £2.00 and the value of one right is £3.00
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The ex rights share price is £4.17 and the value of one right is £2.00
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The ex rights share price is £4.50 and the value of one right is £0.50
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The ex rights share price is £5.00 and the value of one right is £2.00
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None of the above
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