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Question - MTR Corporation Limited case study - You recently graduated from a company sponsored Master degree in Finance programme and the Chief Financial Officer of MTR Corporation Limited has asked you to take the findings of Stacey and Jim and write a report to him on how to estimate the appropriate cost of capital for MTRC long term investment decisions. The report should comprise but not limited to the following:
1. Compute the long-term cost of debt and analyse the financing side effects of gearing.
2. Compute the cost of equity using the perpetuity (Gordon constant) growth model and the capital asset pricing model. (28 marks)
3. In what circumstances do deferred tax classified as equity? (2 marks)
4. Compute the capital structure based on book value and market value
5. Compute the weighted average cost of capital for MTR Corporation Limited based on book value and market value weights.
6. If projects within MTR Corporation Limited are deemed to be at different levels of risk, advise on the appropriate cost of capital and provide the reasons behind this advice.
7. Evaluate the findings of Stacey and Jim in line with relevant finance theories.
Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest. How much control does the Fed have over this longer real rate?
Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.
Accounting problems, Draw a detailed timeline incorporating the dividends, calculate the exact Payback Period b) the discounted Payback Period. the IRR, the NPV, the Profitability Index.
Term Structure of Interest Rates
Write a report on Internal Controls
Prepare the bank reconciliation for company.
Create a cost-benefit analysis to evaluate the project
Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR
Distinguish between liquidity and profitability.
Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.
Simple Interest, Compound interest, discount rate, force of interest, AV, PV
CAPM and Venture Capital
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