Exam Questions Flashcards
1
Q
What are warrants?
A
Warrants are a debt sweetner that reduces the interest payable and gives an option to buy shares at a fixed price at a later date
2
Q
What discount rates should be used in the calculation for the acquisition of a machine and or the leasing of a machine?
A
Acquisition - After-tax risk adjusted cost of capital
Leasing - After-tax cost of borrowing
3
Q
How does the M&M calculation of WACC change if a company is loss making?
A
As the company cannot claim tax relief it is essentially operating in a no tax environment and therefore the WACC is unaffected and should stay the same
4
Q
What is the calculation for real and nominal interest rates?
A
(1+nominal) = (1+real) x (1+inflation)
