ALB Co has the following financial objectives:

• to achieve an average earnings growth of at least 6% per annum
• to keep its gearing, measured as [debt / (debt + equity)] by market value, below 35%

In the last three years, ALB Co's operating profit has grown from $4.0 million to $4.6 million, and its profit after tax has grown from $2.3 million to $2.9 million.

ALB Co has 1 million $1 shares in issue, trading at $1.88, and $1,000,000 of bonds, trading at $106 per cent.

BBL Co is based in country G, where the functional currency is the G$.

Some of BBL Co's suppliers are based in the UK, and they invoice BBL Co in British pounds (GBP). Therefore, the directors of BBL Co keep a close eye on the exchange rate between the G$ and the GBP, and they use the interest rate parity theory to estimate the likely future exchange rates.

The current spot rate is G$ / GBP 1.88 (that is G$ 1 = GBP 1.88), and the expected interest rates in the UK and country G respectively are 5% and 8% over the next year.

The share price of Woundale Co rose from $2.00 to $2.30 last year. During the year, the company paid out a dividend of $0.12 per share.

Q Co is an entity that was set up by the government of Country Q to produce electricity for the country's citizens.

Five years ago it was privatised as the government of Country Q opened up the energy market to competition. The shares of Q co are now owned by both private investors and institutions, and are traded on Country Q's stock market.

Blunderbuss Co is a listed company with 1 million $1 shares in issue and long term bank borrowings of $5 million. The bank interest rate in the most recent year was 8%, but this is expected to change to 10% for the whole of next year.

The company made an operating profit of $1.84 million last year.

Spray Co has a $10 million fixed rate borrowing. It has entered an interest rate swap to swap the interest to a floating rate for a three year period.

The bank has quoted a swap rate of 4.10% for LIBOR, with interest fixing dates on the start date of each year of the swap agreement.

Spray Co's fixed rate of interest is 4.40%.

LIBOR on the start date of year 2 of the three year swap agreement was 4.25%, but this had risen to 4.58% by the end of year 2 (12 months later).

A company is evaluating the decision whether to lease an asset or to buy it outright using newly borrowed funds.

Chapman Co has just reported a pre-tax profit of $24.29m, and the value of its tangible assets in its statement of financial position is $128.66m.

The average return on assets for companies in the same industry is 10%.

The tax rate is 30% and Chapman Co's cost of capital is 16%.

Molier is an unquoted entity with a recently reported after-tax earnings of $3,840,000. It has issued 1 million ordinary shares with nominal value of $0.50 each. A similar listed entity has a P/E ratio of 9.

BB is considering a takeover bid for QQ.

BB has prepared a valuation of QQ based on a forecast of cash flows before financing charges, discounted at an appropriate weighted average cost of capital. The valuation is $130 million.

If BB does acquire QQ, QQ's debt of $20 million will become repayable.