Q1) For a project, a 10% decrease in revenue will cause its EBITDA to decrease by 20%. The depreciation and amortisation for the project is $10,000. State whether the following statement is True or False:

The EBIT for the project will be more sensitive than EBITDA to such changes in revenue.

Select one:

True

False

Q2) For a particular production project, the financial analyst estimates the expected unit sales, the expected unit price and the expected unit variable cost. Based on these estimations, the analyst determines that the expected NPV of the project is $100,000. To understand the risk associated with the project, the analyst further conducts the following analysis: The analyst considers the situation when the unit sales are 5% higher than expected, the unit price is 5% higher than expected, and the unit variable cost is 5% lower than expected. It is noted that the NPV increases by 11%. The analyst considers another situation when the unit sales are 10% higher than expected, the unit price is 10% higher than expected, and the unit variable cost is 10% lower than expected. It is noted that the NPV increases by 20%. The analysis conducted by the analyst is:

Select one:

a. Decision tree analysis

b. Sensitivity analysis

c. Scenario analysis

d. Simulation analysis

Q3 ABM Ltd. is financed with $200,000 of debt, $200,000 of preference shares and $500,000 of ordinary shares (all mentioned values are market values). The cost of debt before tax is 4%, and the cost of preference share is 8%. The company is expected pay a $4 dividend per share on its ordinary share next year and the dividend has a constant growth rate of 10%. The current market price for the ordinary share is $80 per share. The company is subject to a 30% tax rate. What is the after-tax weighted average cost of capital for the company?

Select one:

a. 9.20%

b. 12.10%

c. 14.80%

d. 10.73%

Q4 The generally utlized model to estimate the cost of ordinary shares for a company, especially if the result will be used in discount rate for evaluating a project, is

Select one:

a. a one-stage constant growth model.

b. a multistage growth model.

c. the CAPM.

d. none of the other choices.

Q5 MBB Drilling Ltd. has issued 10-year zero-coupon bonds. Each of these bonds has a face value of $1000 and 8 years until maturity. The interest on the bonds is compounded semi-annually. The market price for the bonds is $910 per unit. What is the company's cost of debt after tax if corporate tax rate is 30%?

Select one:

a. 0.83%

b. 1.18%

c. 2.95%

d. 0.66%