世新大學九十三學年度碩士在職專班招生考試試題卷
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系所別 |
考試科目 |
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財務金融學系 |
財務管理 |
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考生請在答案卷上作答
1. In order to justify mergers, many scholars have proposed several reasons. Among the more prominent are (1)Control, (2)Risk Reduction, (3)Tax Considerations, (4)Synergy, (5)Globalization, and (6)Purchase of Assets at Below-Replacement Cost.
Mostly, which of the reasons are economically justifiable? Which are not? Please explain. (18%)
2. The Jason Wheel Company is planning to invest in a new product line, bicycle saddles, and it has no previous experience in these products. Jason’s upper managers are uncertain about the systematic risk of this investment, so they have attached the following probabilities to possible betas:
Probability: 0.10 0.20 0.40 0.30
Beta: 0.80 1.20 1.30 1.60
The Jason Wheel Company has estimated that the average rate of return on the S&P 500 will be 14 percent during the next 5 years, and it also believes that the interest rate on Treasury securities will average 5 percent over the same interval of time.
(a)What is the expected required rate of return for the Jason Wheel Company? (6%)
(b)What is the range of required rates of return for the Jason Wheel Company? (6%)
3. The Genuire Machine Company is considering three possible investment proposals. The expected net present values (discounted at a risk-free rate) and standard deviations are as follows:
Project Expected NPV Standard Deviation
1 $15,000 $10,000
2 20,000 10,000
3 12,000 12,000
The correlation coefficient for Projects 1 and 2 +0.70; for Projects 2 and 3 it is +0.30; for Projects 1 and 3 it is –0.40. Because of limitations on available funds, a maximum of two proposals may accepted. Please identify the dominating combinations(s) and explain. (20%)
4. Jahunn Securities Inc. has decided to acquire a new market data and quotation system for its San Jose home office. The system receives current market prices and other information from several on-line data services, then either displays the information on a screen or stores it for later retrieval by the firm’s brokers. The system also permits customers to call up current quotes on terminals in the lobby. The equipment costs $1,000,000, and if it were purchased, Jahunn could obtain a term loan for the full purchase price at a 10 percent interest rate. The equipment is classified as a special-purpose computer, so it falls into the MACRS 3-year class (MACRS rates for Year 1 to Year 4 are as follows: 0.33, 0.45, 0.15, 0.07). If the system were purchased, a 4-year maintenance contract could be obtained at a cost of $20,000 per year, payable at the Beginning of each year. The equipment would be sold after 4 years, and the best estimate if its residual value at that time is $100,000. However, since real-time display system technology is changing rapidly, the actual value is uncertain.
As an alternative to the borrow-and-buy plan, the equipment manufacturer informed Jahunn that Consolidated Leasing would be willing to write a 4-year guideline lease on the equipment, including maintenance, for payments of $280,000 at the Beginning of each year. Jahunn’s marginal federal-plus-state tax rate is 40 percent. You have been asked to analyze the lease-versus-purchase decision, and in the process to answer the following questions:
(a)What effect does leasing have on a firm’s capital structure? (5%)
(b)What is the present value cost of owning the equipment? (Hint: Set up a time line which shows the net cash flows over the PV cost of owning.) (15%)
(c)What is the net advantage to leasing (NAL)? Does your analysis indicate that Jahunn should buy or lease the equipment? Please explain. (15%)
5. Clangwen, Inc. currently pays a $3 annual dividend. Investors believe that dividends will grow at 18% next year, 11% annually for the two years after that, and 8% annually thereafter. Assume the required is 12%. What is the current market price of the stock? (10%)
6. Johnny is considering an investment with a quoted return of 8% per year. If interest is compounded quarterly, what is the effective return on this investment? (5%)
al good