Company A is based in country A with the AS as its functional currency. It expects to receive BS20 million from Company B in settlement of an export invoice.
The current exchange rate is A$1 =B$2 and the daily standard deviation of this exchange rate = 0 5% What is the one-day 95% VaR in AS?

• A. A$822,500
• B. A$50,000
• C. A$82,250
• D. A$164,500

A major energy company, GDE, generates and distributes electricity in country A. The government of country A is concerned about rising inflation and has imposed price controls on GDE, limiting the price it can charge per unit of electricity sold to both domestic and commercial customers. It is likely that price controls will continue for the foreseeable future.
The introduction of price controls is likely to reduce the profit for the current year from $3 billion to $1 billion.
The company has:
* Distributable reserves of $2 billion.
* Surplus cash at the start of the year of $1 billion.
* Plans to pay a total dividend of $1.5 billion in respect of the current year, representing a small annual increase as in previous years. However, no dividends have yet been announced.
Which THREE of the following responses would be MOST appropriate for GDE following the imposition of price controls?

• A. Announce a reduction in the annual dividend to a more sustainable level given the new price controls regime.
• B. Raise funds by means of a rights issue in order to maintain historical dividend levels.
• C. Actively look for a private equity investor to introduce new and innovative business and financial strategies to the business.
• D. Carry out a wide-ranging review of costs and staffing levels to identify possible cost savings and redundancies.
• E. Actively investigate potential new ways of generating revenue by the sale of related goods and services that are outside the scope of the price controls.

Company A has just announced a takeover bid for Company B. The two companies are large companies in the same industry_ The bid is considered to be hostile.
Company B's Board of Directors intends to try to prevent the takeover as they do not consider it to be in the best interests of shareholders Which THREE of the following are considered to be legitimate post-offer defences?

• A. Refer the bid to the competition authorities to try to have the bid prohibited on competition grounds
• B. Have all the assets independently professionally revalued to demonstrate that the offer undervalues the company
• C. Make a counter bid for Company A provided such an acquisition could enhance Company B's shareholder wealth
• D. Publish very optimistic financial forecasts for Company B even though the Board of Directors realises that these are highly unlikely to be achievable
• E. Alter the memorandum and articles of association to state that a minimum of 75% of shareholders must agree to the bid before it can proceed

Company W has received an unwelcome takeover bid from Company B. The offer is a share exchange of 3 shares in Company B for 5 shares in Company Wora cash alternative of $5.70 for each Company W share.
Company B is approximately twice the size of Company W based on market capitalisation. Although the two companies have some common business interested the main aim of the bid is diversification for Company B.
Company W has substantial cash balances which the directors were planning to use to fund an acquisition.
These plans have not been announced to the market.
The following share price information is relevant.

Which of the following would be the most appropriate action by Company W's directors following receipt of this hostile bid?

• A. Pay a one-off special dividend.
• B. Refer the bid to the country's competition authorities.
• C. Change the Articles of Association to increase the percentage of shareholder votes required to approve a takeover.
• D. Write to shareholders explaining fully why the company's share price is under valued.

Company A is based in Country A where the functional currency is the A$. Currently all sales are to domestic customers in Country A. However, the company is planning to expand internationally by acquiring Company B, a distribution company in Country B, to enable it to sell goods worldwide The functional currency of Country B is the BS Company A will invoice its international customers in their local currency.
Wage increases in Country B are forecast to be modest, due to high unemployment levels, but overall inflation in Country B is forecast to be significantly higher than in Country A Which TWO of the following statements about the economic risk of the acquisition of Company B are true?

• A. Using purchasing power parity, AS is forecast to strengthen against B$, so the economic risk can be ignored
• B. Financing this acquisition with block denominated in B$ will reduce economic risk.
• C. Exporting into a variety of international markets will reduce economic risk.
• D. Economic risk can be eliminated by using forward contracts to convert future cash flows into A$
• E. Higher inflation will increase the project's BS returns, so the economic risk can be ignored