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Equity Securities.pdf - Table No. SOUTHERN UNIVERSITY...

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SOUTHERNUNIVERSITYCOLLEGE*#A* *ftTableNo.FinalExaminationSemester2/Year2019COURSE:EQUITY SECURITIESCOURSE CODE:BBFN3413TIME: 2 1/2HOURSDEPARTMENT:FINANCELECTURER:MICHAELCHAIStudent'sIDBatchNoIIJUL2019Notestocandidates:1)Thequestion paperconsistsof 4pagesand 5questions.2)AnswerALLquestions.3)WriteALLyour answersin theanswer booklet.4)Returnthequestion paperand theanswer booklet.
EQUITY SECURITIESQuestion1(Total:10marks)Youarevaluingan IPOfirmin aparticular industry. Across similar publicfirmsin theindustry,theaverage levered betais1.2,theaverage debt-to-equity ratiois31%,and theaverage marginaltaxrateis35%. Your firm's debt-to-equity ratiois40%. Assuming thatthemarginaltaxrateforyourfirmisalso 35%, calculatetheappropriate levered betaforyourfirm.Question2(Total:30marks)YouarevaluingZanadu Corporation usinga DCFmodel.Thefreecashflowto thefirm(FCFF)for themost recent fiscal yearwas$120 million.Youexpect these cashflowstogrowat arateof 8% for thenextsixyears.Afterthe sixyears,thefirm's patent expiresandyouexpectcashflowstoremainflat(zero growth)inperpetuity.

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Term
Fall
Professor
NoProfessor
Tags
Generally Accepted Accounting Principles

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