課程名稱︰財務管理
課程性質︰必修
課程教師︰何憲章
開課學院：管理學院
開課系所︰財金系
考試日期（年月日）︰2011/1/5
考試時限（分鐘）：180
是否需發放獎勵金：是
（如未明確表示，則不予發放）
試題 :
Prof. Hsien-Chan Ho
Financial Management Final Exam
Note: Answer to the 4th decimal point, and list your calculation procedures.
1.A firm considers buying a $200,000 machine, which is expected to generate
perpetual annual sales revenue of $250,000. Cost of goods sold will be 80%
of sales revenue, and the firm's before tax cost of debt Kd is 15%. Suppose
the firm's all-equity cost of capital K0 is 20%, but now the firm plans to
raise debt to maintain the target debt-to-value ratio (D/VL) at 2/3.The firm's
tax rate is 30%.
(1)By traditional NPV method, calculate the NPV for the all-equity firm.
(2)By Adjusted Present Value Approach,calculate the APV for the leveraged firm.
(3)By Flow-to-Equity Approach, calculate the NPV for the leveraged firm.
(4)By Weighted Average Cost of Capital Approach, calculate the NPV for the
leveraged firm.
2.A firm considers purchasing a $100,000 machine which will be depreciated by
acceleration method to zero over its 5-year life with annual depreciation rates
of 0.24, 0.22, 0.20, 0.18,and 0.16 respectively. A leasing firm offers annual
leasing payment of $25,000 over 5 years. If the firm's before tax cost of debt
Kd is 9%, and its marginal tax rate is 30%, then by Incremental NPV method,
(1)What is the Incremental NPV for the Buy-vs-Lease project? Should it buy or
lease?
(2)What is the break-even annual leasing payment L*?
(3)If the firm's before tax cost of debt Kd is decreased to 8%, what is the
new Incremental NPV? Should it buy or lease?
3.(1)A firm issued 20 company warrants, each of which gives the holder the
right to subscribe 5 common stock shares at the price of $21 per share. The
firm has 300 shares of outstanding common stock with current market price of
$25 per share. Suppose it is an all-equity firm and all the warrents will be
exercised, then
(a)after the exercise, what is the value per share of the common stock?
(b)if it were option, what is the option value Pc?
(c)what is the warrant value Pw?
(2)A firm's convertible bond (CB) is due in 10 years with face value of $10,000
,5% annual coupon rate (but paying coupon semi-annually), and 4.6% yield to
maturity. Its conversion price was $50 per share. Its conversion price was $50
per share. Its current market price is $11,000. If the firm's current market
price of common stock is $52 per share, then what is the CB's
(a)Straight Bond Value?
(b)Conversion Ratio?
(c)Conversion Value?
(d)Option Value?
4. Before the Merger & Acquisition (M&A),A Company has 100 shares with $100 per
share, B company has 50 shares with $50 per share. After M&A, estimated value
of the combined company is $14,000.
(1)If A Company prepares to buy B Company's stock at $70 cash per share, then
(a)What is the NPV of Merger? Should it merge?
(b)After M&A, what's the real value per share of A Company's original stock
holder?
(2)If A Company prepares to exchange B Company's stocks by issuing new shares,
and estimated total value of B Company is $3,500, then
(a)How many new shares will A Company issue?
(b)What's the fair exchange ratio beta of B Company?
(c)After M&A, what's the real value per share of A Company's original stock
holder?
5.State your understanding of MM(Modigliani-Miller) Capital Structure Theory
and comment on its importance in corporate financial management.(Elaborate
your own view point as much as possible)
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