Homework answers / question archive / 1)Suppose that instead of plowing back money bank into lucrative ventures, Tencent China’s management is going to invest in the capital market where expected return on equity (ROE) is 5%, which is below the return of 6

1)Suppose that instead of plowing back money bank into lucrative ventures, Tencent China’s management is going to invest in the capital market where expected return on equity (ROE) is 5%, which is below the return of 6

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1)Suppose that instead of plowing back money bank into lucrative ventures, Tencent China’s management is going to invest in the capital market where expected return on equity (ROE) is 5%, which is below the return of 6.8% that investors could expect to get from comparable securities. It is expected to pay a dividend next year of RM0.63. Assume the zero growth value of Tencent China is RM13.51. Required: (a) Find the sustainable growth rates for the dividends and earnings in these circumstances. Assume a 68.6% payout ratio. (5 marks) (b) Find the new value of the investment opportunities. Explain why this value is negative despite the positive growth rate in earnings and dividends. (5 marks) (c) If you were a corporate raider, would Tencent China be a good target for a takeover?(5 marks) (d) In your opinion, how would Tencent China’s decision to pay out a higher percentage of its earnings as dividends presently affect its future share price?

2)The Statement of Comprehensive Income for 2019 and 2018 given below were extracted from the accounting records of Teddy Manufactures limited: Teddy Manufactures Limited Statement of Comprehensive Income for the year ended 31 December 2019 2018 Net sales Cost of sales Gross profit (R) 1 003 600 (905 600) (R) 901 300 (744 300) 98 000 (92 000) 157 000 (65 000) Selling, general and administrative expenses Income from operations 6 000 92 000 Other income/expenses Non-operating income Interest expense Profit before tax 124 500 (90 500) 18 000 (57 000) Income tax Net profit 40 000 (12 000) 53 000 (15 900) 28 000 37 100 Required: Refer to the Statement of Comprehensive Income of Teddy Manufacturers Limited for 2019 and 2018 and comment on the performance of the company including the operating profit earned. Take into account that the profit margin (percentage Profit after tax to sales) for the industry was 4.51% in 2018 and 2.60% in 2019. (4) )

3)Marvel Corp buys an automobile at $18,000 list price and $2,000 customs duty. Marvel estimates to use it in next five years, after five years the vehicle's value estimated as $4,000. According to straight line method the vehicle's depreciation expense per year will be:

4)

gennings Mining Co. acquires a silver mine at $24,000,000. Company estimates 60,000 tones silver there. After extracted all the mine residual value estimated is $1,000,000. What's the per tone depletion? *

$233.73

$400

$433

$383.33

5)

On December 31, 2020, the Statement of Financial Position of ABC partnership with profit or loss ratio of 4:1:5 is presented below:

Cash 2,100,000

Liability to third person 5,600,000

Noncash asset 11,200,000

Alucard, capital 4,900,000

Baxia, capital 2,100,000

Claude, capital 700,000

On January 1, 2021, ABC partnership has been subjected to installment liquidation. As of January 31, 2021, the following data concerning liquidation are provided:

o Noncash asset with book value of P8,700,000 has been sold at a loss of P2,800,000.

o Liquidation expense amounting to P560,000 has been incurred for the month of January.

o P840,000 cash has been withheld for future liquidation expense. o P4,200,000 liability has been paid.

What is C’s share in the maximum possible loss on January 31, 2021?

a. P1,050,000 b. P1,680,000 c. P1,820,000 d. P2,100,000

What is the amount received by B on January 31, 2021?

a. P700,000 b. P840,000 c. P1,540,000 d. P2,240,000

What is the cash balance on January 31, 2021?

a. P700,000 b. P840,000 c. P1,540,000 d. P2,240,000