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Fin 621 Financial Economics Question Paper

Fin 621 Financial Economics

Course:Master Of Business Administration

Institution: Africa Nazarene University question papers

Exam Year:2017

AFRICA NAZARENE UNIVERSITY
MASTERS OF BUSINESS ADMINISTRATION
FIN621: FINANCIAL ECONOMICS ASSIGNMENT DL
INSTRUCTIONS:
Answer ALL questions individually (30 Marks) DATE DUE: 8th July 2017

1. Discuss the Capital Asset Pricing Model (CAPM) and comment on its applicability in financial and capital investments in developing countries (15 Marks)

2. Calculate the yield to maturity of a discount bond that sells for USD 15,000 and has a face value of USD 20,000 in one year. (5 Marks)

3. Mickey Corporations Co. Ltd has just declared and paid dividends of Ksh. 1.00 per share. Suppose that the company’s expected growth for the next four years is 7 percent, and thereafter at 2 percent. Its required rate of return is 6 percent. You are required to determine the value of the company’s stock after the fifth year. (5 Marks)

4. Your company is contemplating whether or not to purchase an equipment (hardware and software) that would help enhance data collection, maintenance and analytics. It will you’re your organization USD 223,000.00 to acquire the equipment, and has the capacity to decrease annual data-related costs by USD 40,000. You are told that the estimated useful life of the equipment is 15 years, after which it will have zero salvage value.
Required: what is the internal rate of return of this equipment? Is it a viable investment for your company if cost of capital is 16 percent? (5 Marks)

Fin 621 Financial Economics Question Paper

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