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Using recent case studies, discuss the impact poor governance can have on share price.

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Using recent case studies, discuss the impact poor governance can have on share price.

 

Choose any TWO questions from Section B.

 

Calculators are allowed.

DEADLINE

N/A This is for your own reference

 

UPLOADS

N/A for the sample but please read to familiarise yourself with the process.

 

Your answers should be submitted via https://canvas.qub.ac.uk

 

The format of your answers should be in a pdf document and use your name as the filename when submitting, e.g., BradleyLisa.pdf

 

 

If you need to use handwritten answers there are several options:

  1. Submit individual photos directly to Canvas using your phone browser at https://canvas.qub.ac.uk (this may work better than using the Canvas app); or
  2. Download the Microsoft Lens app to your phone to produce a PDF, and upload this to Canvas via your OneDrive (https://community.canvaslms.com/docs/DOC-10560-4212675755); or
  • Email yourself the photos to compile them on your computer, and then submit via Canvas

 

CONTACT DURING THE TEST

 

If you have queries during the test you can email l.bradley@qub.ac.uk. If you have broadband issues and need to use the phone, you can contact the Management School office on 028 9097 4200. If you have technical queries, such as around accessing Canvas, you can contact the Exams Office at exams@qub.ac.uk

 

STATEMENT OF INTEGRITY

 

By submitting the work, I declare that:

  1. I have read and understood the University regulations relating to academic offences, including collusion and plagiarism: http://www.qub.ac.uk/directorates/AcademicStudentAffairs/AcademicAffairs/GeneralRegulations/Procedures/ProceduresforDealingwithAcademicOffences/
  2. The submission is my own original work, and no part of it has been submitted for any other assignments, except as otherwise permitted.
  3. I did not use notes or any other material, including online resources, at any stage during the examination.
  4. I did not contact anyone and/or share/request material from anyone. The only contact allowed during a test are with those referenced above in ‘the contact during the test’ section.
  5. All sources used, published or unpublished, have been acknowledged.
  6. I give my consent for the work to be scanned using a plagiarism detection software.
  7. I agree to complete an oral assessment if requested to do so.

 

 

Please insert your details in the space below

 

Name:

 

Student Number:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Section A: Multiple Choice.

 

Answer ALL the questions in Section A by selecting one from a), b), c) or d). Write your answer in your answer booklet.  Each question is worth one mark of the overall total.

 

YOU MUST INCLUDE YOUR CALCULATIONS

 

  1. Your business expects to receive a payment of £15000 one year from now. What is the present value of this payment assuming a discount rate of 5%?

 

  1. £15005
  2. £14706
  3. £14286
  4. £15750

 

  1. If interest rates rise, what will be the effect on the price of a 3% corporate bond?

 

  1. Price will rise
  2. Price will fall
  3. There will be no impact on the price
  4. Price will remain the same, but the interest received will rise

 

  1. The assumed objective for finance is:

 

a.     Maximisation of profit

b.     Maximisation of market share

c.     Maximisation of empire

d.     Maximisation of shareholder wealth

 

  1. The principle agent problem can be diminished by:

 

a.     Reducing Corporate governance regulation

b.     Asymmetric information

c.     Inefficient markets

d.     Managerial compensation based on market share.

 

  1. A stock is overvalued if the intrinsic value (V0):

 

  1. V0 = Stock Price
  2. V0 ≥ or ≤ Stock Price
  3. V0 < Stock Price
  4. V0 > Stock Price

 

  1. Asymmetric information is

 

a.     How investments support a particular transaction

b.     When parties to a transaction have the same information as each other

c.     When one party has better information than another

d.     Expenses incurred as a result of buying and selling securities

 

  1. You are valuing a project that is expected to earn a one-time cash flow of £500m in four years. You estimate a discount rate of 8%. What is the present value of this cash flow?

 

a.     £294m

b.     £94m

c.     £368m

d.     £138m

 

  1. One of the main causes of costs increases for UK firms over the past two years has been:

 

  1. The depreciation of sterling against the euro
  2. The appreciation of sterling against the euro
  3. The increase in the value of sterling against major currencies
  4. The appreciation of sterling against the US dollar

 

  1. An investment offers a perpetual cash flow of £400 every year. The required return on the investment is 11%. The PV of the investment is?

 

a.     £36

b.     £363

c.     £3636

d.     £36363

 

  1. Suppose a perpetual bond has been issued at par £1000 with coupon interest payment £30.00 Now 10 years after issue the required rate rises to 5%. What is the current value / price of this bond?

 

  1. £600
  2. £1000
  3. £1040
  4. £800

 

  1. FDM ltd issues a two-year bond with a 6% coupon rate and interest repayable annually. The bond is priced at its face value of £100 and the market rate of interest is 12%. What is its current value?

 

a.     £90

b.     £40

c.     £60

d.     £100

 

  1. The annual payment to a bond holder is called a:

 

  1. default provision
  2. dividend
  3. perpetuity
  4. coupon

 

  1. In the event of a company going into liquidation, who would normally have the highest priority for payment?

 

  1. Ordinary shareholders
  2. Deferred ordinary shareholders
  3. Bond holders
  4. Preference shareholders
  5. The internal rate of return is:

 

  1. The rate of return at which the NPV is 0
  2. The rate of return at which the NPV is increasing
  3. The rate of return at which the NPV is greater than the profitability index
  4. The rate of return at which the NPV is falling

 

  1. You are considering a one-year investment. If you invest £600 you are promised £618 in a year’s time. What rate is this investment paying?

 

  1. £18
  2. 03%
  3. 3%
  4. 3%

 

Use the following expectations on Stocks X and Y to answer the following four questions

 

  Probability Stock X Stock Y
Bear Market 0.2 -20% 6%
Normal Market 0.3 10% 10%
Bull Market 0.5 20% 12%

 

  1. What is the expected return of Stock X ?

 

a.       10.2%

  1. 5%
  2. 4%
  3. 9%

 

  1. What is the expected return of Stock Y?

 

a.     10.2%

b.     9%

  1. 4%
  2. 5%

 

 

 

 

 

 

  1. What are the standard deviations of returns on Stocks X and Y?

 

Stock X               Stock Y

a.     13%                    2.3%

  1. 169% 13%
  2. 3% 13%
  3. 13% 169%

 

 

 

 

 

 

 

 

 

  1. Assume that of your £1,000 portfolio, you invest £300 in Stock X and £700 in Stock Y. What is the expected return on your portfolio?

 

a.     6%

b.     10%

c.     16%

d.     20%

 

 

For the following two questions refer to the information below:

 

The management of FDM Plc. are currently evaluating an investment in products costing £15,000.  Anticipated net cash inflows are over three years with £6,000 received at the end of year 1, 2 and 3.

 

  1. If the discount rate is 8%, calculate the projects Net Present Value (NPV).

 

a.     – £4,620

b.     – £462

c.     £462

d.     £4,620

 

  1. If the discount rate was 6% and applying the NPV rule:

 

a.     The project should be accepted

b.     The project should be rejected

c.     More information is required

d.     The project has a zero NPV

 

 

 

 

  1. Which of the following sources of finance is NOT an external source of finance?

 

a.     Working Capital

b.     Debt Finance

c.     Private Equity Finance

d.     Public Equity Finance

 

 

For the following four questions refer to the information below:

 

  E(R) σ
Asset A 8 6
Asset B 15 3

 

 

 

 

 

  1. Calculate the expected return of the two-asset portfolio to an investor with equal amounts invested in each asset.

 

a.     7

b.     12%

c.     14%

d.     10%

 

  1. Calculate the portfolios risk. The covariance between the two assets is 5.

 

a.     1.3%

b.     13.8%     

c.     3.7%

d.     10%

 

 

  1. Calculate the portfolios correlation

 

a.     0

b.     0.28

c.     0.6

d.     -0.28

 

 

  1. If instead the investor invested 75% of his wealth in Asset A, the portfolio expected return would:

 

a.     Increase

b.     Decrease

c.     Not change

d.     Increase or decrease

 

 

  1. A bear market:

 

a.     Characterised by investor confidence that strong results will continue

b.     Is a market condition in which prices of securities are falling

c.     Is a market condition in which prices of securities are rising

d.     Occurs in an economy with low inflation

 

  1. Which of the following is a role of the London Stock Exchange?

 

a.     To regulate banks

b.     To authorise brokers

c.     To price securities

d.     To provide a market for securities

 

  1. Which of the following is an example of a capital structure decision?

 

a.     Issuing new shares

b.     Buying a new factory

c.     Reducing inventory levels

d.     Increasing staffing levels

 

  1. Retained earnings are often a preferred source of finance due to:

 

a.     The tax shield on debt.

b.     Issue costs

c.     Decision making freedom

d.     Dilution of ownership

 

Total 30 Marks

 

 

Section B

 

Answer IN YOUR OWN WORDS any TWO questions.

 

All questions are worth 25 marks of the overall total.

 

Maximum of 1000 words per question (include word count per question)

 

 

1.

(a)  Manager and shareholders may not always have the same objectives. Using agency theory, discuss the potential conflict from this principal-agent relationship.

(8 marks)

 

 

(b)    Using recent case studies, discuss the impact poor governance can have on share price.

(12 marks)

 

 

Total 20 marks

 

    • Distinguish between the methodological approaches to fundamental and technical analysts to predict the growth trends of stocks.

(8 marks)

 

  • Thirteen years on from collapse of Lehman Brothers,

 

  • Discuss the legacy of the Lehman Brothers collapse.
  • Consider how human psychology impacts on financial markets.

(12 marks)

 

Total 20 Marks

(a)  Consider the advantages and disadvantages of investment appraisal techniques used by managers to make long-term investment decisions.

(8 marks)

 

  • The Bank of England’s primary functions include maintaining monetary stability and overseeing financial stability of the UK financial system. Discuss.

 (12 marks)

 

 

Total 20 Marks

 

END OF EXAMINATION

 

 

MGT7036 – Formula

 

Present Value

 

Present Value of Perpetuity

 

 

Net Present Value:

 

 

 

 

 

 

Accounting Rate of Return

 

 

 

 

 

 

Expected return on an asset:

 

 

 

 

 

Risk of an asset:

 

 

 

 

 

 

 

 

Expected Return of a Two-Asset Portfolio

 

 

 

 

 

Risk of a Two-Asset portfolio

 

 

 

 

 

 

Covariance and Correlation

 

COVij = rij si  sj

 

 

 

MGT Class Test Sample

APA

 

 

 

CLICK HERE TO ORDER A SIMILAR OR ANY OTHER ASSIGNMENT YOU HAVE ASSIGNMENT

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