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THE UNIVERSITY OF THE WEST INDIES

CAVE HILL

EXAMINATIONS OF December 2021.

CODE AND NAME OF COURSE: ACCT 6011 CORPORATE FINANCE

DATE AND TIME: DURATION: 3 HOURS

INSTRUCTIONS TO CANDIDATES: This paper page and 5 questions.

Students are required to answer four questions of their

choice.

1. Using the attached spreadsheet please estimate the share prices of StarShine and Belvino
and discuss any differences in the share prices. 20 marks

2. Discuss the main insights of Behavioral Finance and the implications for Financial
Management. 20 marks
3. Critically evaluate the role of credit rating agencies in modern financial markets. 20
marks

4. a. Calculate the Net Present Value and the Internal Rate of Return for the Escondido
Power Plant (Case Study Attached). 15 Marks

b. Discuss why Net Present Value is viewed as the ‘best’ technique for capital
budgeting.5 Marks

TURN OVER

The University of the West Indies Course Code: 2020/.. /..

DO NOT WRITE OR TYPE ON THE BACK OF THIS SHEET: USE ONE SIDE ONLY

INSTRUCTIONS: Each page of this draft must be signed by the FIRST AND SECOND EXAMINERS. Completed forms
should be handed to the Assistant Registrar (Examinations)

..................................................
First Examiner Second Examiner

Date: 2021/04.........../02........ Date: 2020/........../........

 Question 5

a. Using the data in the table below calculate the expected return and risk of the
investment. (5 Marks)

State of the World Rate Of Return Probability

1 -0.10 0.10
2 0.15 0.20
3 0.25 0.40
4 0.40 0.20
5 0.15 0.10

a. b. Using the data in the table below calculate the expected return and risk of any
equally weighted portfolio of two of the stocks listed below and an equally weighted
portfolio of any three of the stocks listed below. (15 Marks)

Returns 0.25 0.15 0.10 0.18 0.23 0.46 0.24

Apple Microsoft Target Starbuck Goodyear Ford Berkshire
s Hathaway
Standard
Deviation 41.0% 26.0% 28.0% 32.0% 56.0% 59.0% 17.0%
Correlations
Apple 1 0.48 0.38 0.38 0.31 0.23 0.06
Microsoft 0.48 1 0.39 0.36 0.33 0.36 0.16
Target 0.38 0.39 1 0.39 0.50 0.47 0.27
Starbucks 0.38 0.36 0.39 1 0.41 0.27 0.20
Goodyear 0.31 0.33 0.50 0.41 1 0.58 0.38
Ford 0.23 0.36 0.47 0.27 0.58 1 0.27
Berkshire
Hathaway 0.06 0.16 0.27 0.20 0.38 0.27 1

TURN OVER

The University of the West Indies Course Code: 2020/.. /..

DO NOT WRITE OR TYPE ON THE BACK OF THIS SHEET: USE ONE SIDE ONLY

INSTRUCTIONS: Each page of this draft must be signed by the FIRST AND SECOND EXAMINERS. Completed forms
should be handed to the Assistant Registrar (Examinations)

..................................................
First Examiner Second Examiner

Date: 2021/04.........../02........ Date: 2020/........../........