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Business Finance Exam Guide

1. The document provides instructions for a final exam in strategic business analysis. It includes essay questions covering topics like equity vs. debt financing, factors affecting bond riskiness, hybrid nature of preferred shares, advantages and disadvantages of leasing, investor preferences for capital gains vs. dividends, and the importance of ex-dividend dates. 2. There are also two problems analyzing a stock split by Dipsy Corp. and share repurchases by Po Inc., requiring calculations of share prices, earnings per share, and price-to-earnings ratios before and after the corporate actions. 3. Financial managers must understand these concepts around financing options, bond and share characteristics, and corporate actions to effectively analyze

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325 views1 page

Business Finance Exam Guide

1. The document provides instructions for a final exam in strategic business analysis. It includes essay questions covering topics like equity vs. debt financing, factors affecting bond riskiness, hybrid nature of preferred shares, advantages and disadvantages of leasing, investor preferences for capital gains vs. dividends, and the importance of ex-dividend dates. 2. There are also two problems analyzing a stock split by Dipsy Corp. and share repurchases by Po Inc., requiring calculations of share prices, earnings per share, and price-to-earnings ratios before and after the corporate actions. 3. Financial managers must understand these concepts around financing options, bond and share characteristics, and corporate actions to effectively analyze

Uploaded by

jasf
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • Final Exam Strategic Business Analysis

Name:

Section:

FINAL EXAM STRATEGIC BUSINESS ANALYSIS

Instructions: Indicate your answer on a separate answer sheet.


Email your answers here: james.adayo@dlsau.edu.ph
Email subject: SURNAME_SBA_FINALEXAM

Essay
Rubrics: A total of 14 points each. 10 points for content; 4 points for construction
a. Differentiate equity financing and debt financing. What is the advantage of one over the
other?
b. What are the two factors that affects the bond’s riskiness? Why do financial managers
need to know them?
c. Why do preferred shares are considered to be “hybrid”?
d. Weigh-in the advantages and disadvantages of leasing over debt financing in acquiring
long-term assets i.e. property, plant, and equipment?
e. Why did most of the investors prefer capital gains than dividends pay-out?
f. Why is it important to investors to know the ex-dividend date?
g. How do stock dividends and splits affect stock prices?

Problem A
Dipsy Corp. recently completed a 2-for-1 stock split. Before the split, the company had
10,000,000 shares outstanding and its stock price was P150 per share. After the split, the total
market value of the company’s stock equaled P1.5 billion. The total share capital balance of
Dipsy Corp. is P350,000,000.
1. What was the price of the company’s stock following the stock split?
2. Determine the new par value of each shares.

Problem B
Po Inc. believes that at its current share price of P16.00 the firm is undervalued. Makeover
plans to repurchase 2.4 million of its 20 million shares outstanding. The Po Inc.’s managers
expect that they can repurchase the entire 2.4 million shares at the expected equilibrium price
after repurchase. The Po Inc.’s current earnings are P44,000,000. If management’s
assumptions hold, answer the following,
1. The current earnings per share is
2. What is the price to earnings ratio?
3. How much is the earnings per share after the repurchase?
4. What is the expected per-share market price after repurchase?

Name: Section:

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