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C3753FP Financial Management 2 (Year Module 2026) [FM] [F]
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Easygo Ltd considered financing a long-term project with its bank overdraft. Why is this inappropriate?
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Under which condition is it appropriate to use the company's existing WACC as the discount rate for a new project?
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The WACC based on CURRENT market values should be used to evaluate a new project when:
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Why does a constant dividend payout ratio allow one to use the growth in earnings as the dividend growth rate?
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Dogtail Limited has 10 million ordinary shares trading at 860 cents each. What is the market value of the ordinary shares?
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What is the effect of flotation costs on the cost of a new source of finance?
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Dogtail Limited's 14% debentures have a face value of R200, trade at R225 and will be redeemed in four years at a premium of 5%. What is the annual interest payment (PMT) and redemption value (FV) per debenture?
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Company ABC issues 11% debentures (nominal value R100). Net proceeds after 1% flotation costs are R89.10 per debenture and the tax rate is 28%. What is the after-tax cost of debt (rounded)?
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The CEO of Easygo Ltd measured the profitability of a project as the difference between its 15% return and the interest rate on the loan used to finance it. Why is this approach wrong?
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A company finances 60% with equity at 15% and 40% with debt at an after-tax cost of 7.2%. What is the WACC?
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