Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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A
company has an operating profit before tax of £160million, depreciation and amortization are
£40 million. Its operating cash flow is £260 million and its revenue growth is 10 per
cent. In the previous year the operating gearing of the firm was 45 per cent. What is the
maximum COP value you would predict for the current year? a. | 1.450 | c. | 1.100 | b. | 2.000 | d. | 1.182 | | | | |
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2.
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In an
expanding business, under assumptions of constant working capital policy, we would normally expect
the reported operating profit (excluding depreciation and amortization) to be: a. | The same as the
reported operating cash flow. | c. | Less than the
operating cash flow. | b. | Greater than the reported operating cash
flow. | d. | Completely
independent of the operating cash flow. | | | | |
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3.
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Free
cash flow to equity before reinvestment is defined as: a. | Operating cash
flow less interest paid, tax but before interest received. | c. | Operating cash flow after tax. | b. | Operating cash
flow less interest paid plus interest received but after tax. | d. | Operating cash flow after tax, less interest
pad. | | | | |
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4.
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A
company has underlying earnings of 60p per share and a share price of 720p. The industry price
earnings ratio is 15 and that of its closest competitor is 13.5. On the basis of this is the
company: a. | Overvalued | c. | Correctly
valued | b. | Undervalued | d. | The company's share price is the correct
value | | | | |
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5.
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Tobin's Q asserts (in its equity form) a simple economic
relationship: a. | The rate of
return on the replacement cost of a firm's assets is equal to the rate of return required by the
equity investors | c. | The relaisable
value of a firm's assets equals their replacement cost | b. | The replacement
cost of a firm's assets equals their book value | d. | The market value of a firm's assets equals their book
value | | | | |
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