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Question 6 (7 marks)

You are working for an importer, which is listed and traded o ASX. Your company maintain a capital structure of 45% in equity funding and 55% of debt funding, which will be applied to a new project which will cost $750,000 next year. Your company has just announced an annual dividend of $3.5 per share. The record date for paying dividend is in three days. Required:

1. When is the ex-dividend date if ASX standard settlement procedure is T+2? calculate the ex-dividend price if market price of the day before ex-dividend date is $78.5, given the dividend tax rate is 15%. (2 marks)

ANSWER:

2. In the current financial year your company got a net income of $945,000. Calculate the amount of net income the company can use to pay dividends to current shareholders, assuming residual dividend theory applies. (2 marks)

ANSWER:

3. Your company needs to make a payment of 2,135,000 yen to a partner in Tokyo. If the indirect quote of AUD/JPY in Sydney is 213.1288, how much Australian dollars you need for the payment? (1 mark)

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4. Your company has an extra cash of A$315 000. The AUD/CHF exchange rate in is 0.692380 Zurich. The CHF/AUD rate in Sydney is 1.44894. Are arbitrage profits possible? Set up an arbitrage scheme with the extra cash. What is the potential gain in AUD dollar? (2 marks)

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