QUESTION 19Identify the incorrect statement concerning valuation methods.O A. A major difficulty with the price/earnings ratio method is determining the future cash flows to which the price/earningsratio is appliedO B. The discounted cash flow method looks at the incremental cash flows arising from a proposed acquisitionOC.The market capitalisation of a company reflects marginal trading in its sharesO D. Net asset valuations are often of little relevance in deciding on a bid priceO E. The dividend growth model offers a deprival value for target shareholders QUESTION 20CFK pic's current share price is E4.00. An Investor is wondering whether to buy shares in CFK or warrants In the company. The warrant has duration of one year and allows the purchase of 20 CFK shares at an exercise price of E4.10. The cost of the warrant is 56.00. Ir theshare price for CFK Is E4.50 In a year's time what are the corresponding returns for buying CFK shares and warrants on CFK shares? CFK plc pald no dividend over this perlod.Return on shares 12.5% Return on the optlon 33.3%Return on shares 25% Return on the option 10%. Return on shares 2.5% Retum on the option 33.3%D. Return on shares 12.5% Return on the option: nllReturn on shares 12.5% Return on the optlon 10%

Return in shares = (current price - purchase price)/purchse price = (4.5 - 4)/4 = 12.5% Return on…

QUESTION 20 CFK plc's current share price is 54.00. An Investor is wondering whether to buy shares in CFK or warrants in the company. The warrant has duration of one year and allows the purchase of 20 CFK shares at an exercise price of 54.10. The cost of the warrant is 56.00. rme share price for CFK is E4.50 in a years time what are the corresponding returns for buying CFK shares and warrants on CFK shares? CFK pic pald no dividend over this period. A. Retum on shares 125% Returm on the option 33.3% . Retum on shares 25% Retum on the option 10% C. Retum on shares 25% Returm on the option 33.3% Retum on shares 12.5% Retun on the option: nill E Retum on shares 12.5% um on the option 10 00000

QUESTION 20 CFK plc's current share price is 54.00. An Investor is wondering whether to buy shares in CFK or warrants in the company. The warrant has duration of one year and allows the purchase of 20 CFK shares at an exercise price of 54.10. The cost of the warrant is 56.00. rme share price for CFK is E4.50 in a years time what are the corresponding returns for buying CFK shares and warrants on CFK shares? CFK pic pald no dividend over this period. A. Retum on shares 125% Returm on the option 33.3% . Retum on shares 25% Retum on the option 10% C. Retum on shares 25% Returm on the option 33.3% Retum on shares 12.5% Retun on the option: nill E Retum on shares 12.5% um on the option 10 00000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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QUESTION 7 Manchester plc is expected to pay annual dividends of £1.50, £1.75 and £2.00 per share at the end of each of the next three years (i.e., from t-1 to t=3). After year 3, annual dividends are expected to grow at a rate of 2% forever. Assuming that shareholders of Manchester plc. require a rate of return equal to 5% per year, what is the fair value for the share of Manchester plc.? O £95.52 £64.70 O £48.37 O £63.48
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Q13 The Engineering Company currently has 100,000 outstanding stocks selling at OMR 100 each. The firm has net profits of OMR 1,000,000 and wants to make new investments of OMR 2,000,000 during the period. The firm is also thinking of declaring a dividend of OMR 5 per share at the end of the current fiscal year. The market price of per stock at the end of the current year is expected to be OMR 120. How many number new stocks to be issued by the firm assume that dividend is declared under MM model? a. 10,000 stocks b. 15,000 stocks c. 20,000 stocks d. 12,500 stocks
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Question 9 options: Joffrey Corporation, a publicly traded company, is requiring an additional $5,000,000. The company has decided that a rights offering could raise the funds that are required. Currently there are 300,000 outstanding common shares and the market price of $55.00 per share. Each shareholder would receive 1 right for every share they own. The subscription price will be $50.00. This means that 100,000 new shares will be issued ($5,000,000/$50). Given this information, 300,000 old shares/100,000 new shares would mean 3 rights plus the subscription price will be required to get 1 new share. Sansa Stark is a shareholder and has 6,000 shares of Joffrey’s Corporation and $280,000 cash in her bank account. She is Queen of the North! What is the value of one right? Round to 2 decimal places. What is the value of Sansa’s portfolio before the rights issue? Round to the nearest dollar. If Sansa exercises her rights and participates in the rights…
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