MGT201 Current Final Term Fall 2013 Shared by innocent larki File 27

my today paper

60 quetions 53 mcqs

7 long 

40%old mcqs others new

long were 

(5 marks)Company XYZ wants to issue more Common Stock of Face Value Rs 12. Next Year the Dividend is expected to be Rs. 3 per share assuming a Dividend Growth Rate of 10% pa. The Lawyer’s fee and Stock Brokers’ Commissions will cost Rs 1 per share. Investors are confident about Company ABC so the Common Share is floated at a Market Price of Rs 18 (i.e. Premium of Rs 6). If the Capital Structure of Company ABC is entirely Common Equity, then what is the Company’s WACC? Use New Stock Issuance Approach to calculate the results.

DIV1 = 2

G= 10%

Lawyer fee and comm. = 1 Rs

Po = 16

Capital structure is equity base 100%

As company is 100 equity it means Unlevearged Company so it’s WACC will be required rate of return on equity.

Required ROR for Common Stock using Gordon’s Formula

r = (DIV1/Po) + g

Po = market price = 18

Div1 = Next Dividend = 3

G = growth rate = 10%

r = (3/18)+10% = 26.66%

Now If company wanted to issue the stock via new float then it has to pay the lawyer fee and broker commission which 1 Rs.

Net proceed = 18 – 1 = 17

r = (3/17)+10% = 27.64%

 what is spontenous financing(5)

what is Kereitsu?(3 marks)

calculae ROE AND ROA values were given

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