ACCT333: Advanced Financial Accounting Question 1 a) Identify ONE (1) company listed on the Singapore Stock Exchange which has high financial gearing. Describe briefly any TWO (2) risks potentially faced by the firm during an economic downturn. b) Valuetronics is an all-equity financed electronics manufacturer listed on the Singapore Stock Exchange. See Figures 1 and 2 Valuetronics intends to take on some debt. Set the level of debt and equity and state it clearly in your answer. For example, 10% of debt and 90% of equity. Based on the level of debt and equity you had set,


ACCT333: Advanced Financial Accounting

Question 1

a) Identify ONE (1) company listed on the Singapore Stock Exchange which has high financial gearing. Describe briefly any TWO (2) risks potentially faced by the firm during an economic downturn.

b) Valuetronics is an all-equity financed electronics manufacturer listed on the Singapore Stock Exchange. See Figures 1 and 2

Valuetronics intends to take on some debt.

Set the level of debt and equity and state it clearly in your answer. For example, 10% of debt and 90% of equity. Based on the level of debt and equity you had set,

i. Calculate the asset beta of Valuetronics.

ii. Describe briefly what effects an increase in the level of debt has on the WACC of Valuetronics.

Note: Use the Hubba Plc example in your notes as a guide.

Question 2

a) Research on ONE (I) company (it can be listed anywhere) that has not given dividends for the past three years.

i. State the Company’s name and basic facts about the company.

ii. Evaluate if the tactics of not giving dividends to their shareholders have been effective.

b) In January 2020. 16 companies listed on the Singapore Stock Exchange had bought back S$30 Million-shares from their shareholders.

b) Select any ONE (I) company listed on the Singapore Stock Exchange,

i. apply the Constant Growth Rate formula and calculate the intrinsic price of a share today.

Note: • Stale the latest annual dividend. • State the estimated growth rate and an estimated required rate of return (using CAPM).

ii. Research on the Price/Earnings multiple for the company. Comparing it against another company in the same industry. explain briefly what the value means.

Questions.4.

a) On 2nd June 2020 the market price (the spot price) of WTI Crude Oil is $74.49 per barrel.

You plan to Dia WTI Crude Oil on 30 September 2021 hum you are concerned about the price.

You open a long futures position of three-month WTI Oil futures contracts at 572.64 (per pound) with expiry on 30th September 2021. Comparing the prices on the WTI Crude Oil market and the futures market, choose one soot mice scenario on 30 September 2021, and explain how futures will help to hedge the risk.

b) Contrast the previous example using a forward contract and explain briefly the difference between a future and a forward contract.

Question 5

a) Identify ONE ( 1) company listed on the Singapore Stock Exchange.

i. Explain briefly, using the share price of the company list different price scenarios when a call option would be “in the money” and “out of money”. Note: You can set the price of the option.

ii. Explain briefly, using the share price of the company list different price scenarios when a put option would be “in the money” and “out of money”. Note: You can set the price of the option.

b) Identify ONE (1) company listed on the Singapore Stock Exchange which is subject to facing interest rate risks as stated in its annual report. Describe briefly how the company mitigates the interest rate risk

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