Comprehensive Minerals NL Borrowed US$35 000 000 from a Syndicate

question 19

Multiple Choice

Comprehensive Minerals NL borrowed US$35 000 000 from a syndicate of European bankers. The agreement was finalized on 1 June 20X5, the money was received on 1 July 20X5, and interest at 4% per half year is payable on 31 December and 30 June of each year. The company’s functional currency is the A$.
The following exchange rates applied.
$\begin{array} { l l l l } \text { 1 June 20X5 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.33 \\\text { 1 July 20X5 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.38 \\\text { 31 December 20X5 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.15 \\\text { 30 June 20X6 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.25 \\\text { 31 December 20X6 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.35 \\\text { 30 June 20X7 } & \text { US } \$ 1.00 & = & \mathrm { A } \$ 1.20\end{array}$

-For the reporting period ending 30 June 20X7 the net amount recognised in the profit or loss statement in respect of the loan will be:

• A)A$1 820 000 expense
• B)A$3 570 000 expense
• C)A$5 320 000 expense
• D)A$2 730 000 revenue

Calculate the anticipated growth rate of a firm using its return on equity (ROE) and dividend payout ratio.

Apply the free cash flow approach to stock valuation.

Comprehend the relationship between the market capitalization rate, the plowback ratio, and the P/E ratio.

Analyze the impact of changing growth rates on dividend payout and stock pricing.

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Definitions:

Internationalization Process

The strategic process that a company undergoes to expand its operations and presence into foreign markets.

Direct Foreign Investment

An investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets.

Ethnocentric Attitude

Holding the belief that one's own culture, nation, or ethnicity is superior to others, often leading to bias and prejudice.

Individualistic Culture

A culture that emphasizes the needs and goals of the individual over the needs and goals of the group.