Corporate Finance 7.5 ECTS
Ladokcode: 21FT1C
The exam is given to:
ExamCode:
Date of exam: 2018-10-30
Time: 09-
13
Means of assistance:
Calculator
Total amount of point on exam: 40 points
Requirements for grading:
To get respective grade the the following points is required:
< 20 points = FX =U
20 points = E =G
22 points = D
26 points = C
30 points = B = VG
34 points = A
Next re-exam date: Exact date not decided yet
The marking period is, for the most part, 15 working days,
otherwise it’s the following date:
Important! Do not forget to write the ExamCode on each paper
you hand in.
Good Luck!
, 1
Examiner: Urban Österlund
Phone number: 0704-
38 33 68
Question 1. (4 points)
Calculate the expected return and the standarddeviation (=risk) for the
stockportflio given below.
Portfolio Expected Standard- Correlation between the stocks
Stock share return deviation Stock 1 Stock 2 Stock 3
Stock 1 40 % 15 % 20 % 1,0 0,3 0,4
Stock 2 30 % 20 % 30 % 0,3 1,0 0,2
Stock 3 30 % 25 % 40 % 0,4 0,2 1,0
Question 2. (4 points)
a/ Calculate the weigted-average cos of capital (rWACC) for Federated Junkyards
of America, using the following information:
Debt; $75 000 000 book value outstanding. The debt is trading at 90
percent of par. The yield to maturity is 9 percent.
Equity: 2 500 000 shares selling at $42 per share. Assume the expected
rate of return on Federated´s stock is 18 percent.
Taxes: Federated´s marginal tax rate is TC = 0,35.
b/ What are the key assumptions underlying your calculation ?
c/ For what type of project would Federated´s weighted-average cost of capital
be the right discount rate ?
Question 3. (4 points)
Nevada Nuggets is deciding whether to buy the right to open an abandoned gold
mine in central Nevada. The price of gold is currently $350 per ounce and in the
next year the price could increase by 20% or decline by 10%. The mine could
extract and refine gold for $360 per ounce.
Ladokcode: 21FT1C
The exam is given to:
ExamCode:
Date of exam: 2018-10-30
Time: 09-
13
Means of assistance:
Calculator
Total amount of point on exam: 40 points
Requirements for grading:
To get respective grade the the following points is required:
< 20 points = FX =U
20 points = E =G
22 points = D
26 points = C
30 points = B = VG
34 points = A
Next re-exam date: Exact date not decided yet
The marking period is, for the most part, 15 working days,
otherwise it’s the following date:
Important! Do not forget to write the ExamCode on each paper
you hand in.
Good Luck!
, 1
Examiner: Urban Österlund
Phone number: 0704-
38 33 68
Question 1. (4 points)
Calculate the expected return and the standarddeviation (=risk) for the
stockportflio given below.
Portfolio Expected Standard- Correlation between the stocks
Stock share return deviation Stock 1 Stock 2 Stock 3
Stock 1 40 % 15 % 20 % 1,0 0,3 0,4
Stock 2 30 % 20 % 30 % 0,3 1,0 0,2
Stock 3 30 % 25 % 40 % 0,4 0,2 1,0
Question 2. (4 points)
a/ Calculate the weigted-average cos of capital (rWACC) for Federated Junkyards
of America, using the following information:
Debt; $75 000 000 book value outstanding. The debt is trading at 90
percent of par. The yield to maturity is 9 percent.
Equity: 2 500 000 shares selling at $42 per share. Assume the expected
rate of return on Federated´s stock is 18 percent.
Taxes: Federated´s marginal tax rate is TC = 0,35.
b/ What are the key assumptions underlying your calculation ?
c/ For what type of project would Federated´s weighted-average cost of capital
be the right discount rate ?
Question 3. (4 points)
Nevada Nuggets is deciding whether to buy the right to open an abandoned gold
mine in central Nevada. The price of gold is currently $350 per ounce and in the
next year the price could increase by 20% or decline by 10%. The mine could
extract and refine gold for $360 per ounce.
