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SOA真题北美精算师大区November2004Course8F（第五）

来源：高顿网校 2014-08-05

　　SOA真题北美精算师大区November2004Course8F（第五），高顿网校美女小编呼唤全国的准北美精算师们来复习此大纲。
　　13. (11 points) You are the CFO for Montague Debt Management. Montague’s balance

　　sheet currently consists of $700 million in assets financed in part by $650 million of

　　equity. The after-tax return on assets is normally distributed with a mean of 13% and

　　standard deviation of 7%. Assume the corporate tax rate is 30%.

　　Debt financing is currently provided by a single source, the Bank of Verona (BOV), at a

　　pretax rate of 10%. BOV requires a positive return on equity (ROE) with a probability of

　　at least 95%.

　　Montague is considering restructuring its capital by increasing the debt financing from

　　BOV. R & J Capital, a regional investment bank, recently suggested to Montague’s

　　senior management that preferred stock or public debt issuance may be more attractive

　　options than additional bank debt.

　　You are given the following statistics with respect to the Standard Normal Distribution:

　　( Pr X ≤ z) z

　　0.50 0.000

　　0.67 0.431

　　0.75 0.674

　　0.80 0.842

　　0.90 1.282

　　0.95 1.645

　　0.99 2.326

　　(a) (3 points) Determine the maximum leverage for Montague that satisfies BOV’s

　　constraints. Show all work.

　　(b) (1 point) Identify the factors that impact the debt capacity decision for Montague

　　and for BOV as they contemplate the debt financing decision.

　　(c) (2 points) Montague’s Board has asked you to differentiate public debt and

　　preferred stock in relation to the following points:

　　? Priority of claim

　　? Control rights

　　? Corporate tax shields

　　? Tax liability for individual and corporate claim holders

　　Outline your reply.

　　COURSE 8: Fall 2004 - 15 - STOP

　　Finance Segment

　　Afternoon Session

　　13. Continued

　　(d) (3 points) Assume Montague has decided not to raise additional debt at this time.

　　R & J Capital has performed an analysis of Montague’s equity using the Equity

　　Cashflow Valuation method and has determined that Montague’s equity is

　　currently overvalued. As a result, R & J Capital has recommended a public equity

　　offering.

　　Identify how R & J Capital’s chosen valuation method may bias their conclusion.

　　(e) (2 points) Assume the risk-free rate is 4% at all maturities and the current market

　　price of the debt is 90%. Calculate the amount by which R & J Capital has

　　misestimated the value of Montague’s equity.

　　14. (4 points) You are the CFO for the small life insurance subsidiary of a large, publiclytraded

　　diversified financial services organization. The subsidiary is fairly new and is

　　growing rapidly by expanding into newer products and markets. The CEO of the life

　　subsidiary has just told you the parent company has been acquired by a competitor.

　　While the acquisition was friendly, the acquirer does not intend to continue operating the

　　life subsidiary.

　　(a) Assume that the life subsidiary becomes a stand-alone organization. Recommend

　　an appropriate capital structure for the life subsidiary. Support your answer.

　　(b) The CEO invites you to join a partnership of senior executives considering a

　　leveraged buyout (LBO) of the life subsidiary. State the ways in which an LBO

　　structure might improve the way the life subsidiary is run.

　　(c) Indicate whether an LBO is appropriate for this situation. Support your answer.

　　**END OF EXAMINATION**

　　AFTERNOON SESSION
　　高顿网校之名人信念：属于自己的，不要放弃；已经失去的，留作回忆。

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