Question 1

Which expression is used to calculate Market Value Added?&#10;A) Market value + Adjusted investment capital&#10;B) Market value - Invested capital&#10;C) Invested capital - Market value&#10;D) Market value - Adjusted investment capital

Accepted Answer

Market Value Added (MVA) is calculated by subtracting the invested capital from the market value of the company.

Question 2

What metric x is calculated using the formula Dividend per share &#215; (Share price at the end of the period - Initial share price) Initial share price&#10; &#10;A) Dividend ratio&#10;B) Mean shareholder return&#10;C) Economic profit&#10;D) Total shareholder return

Accepted Answer

The formula given in the question is used to calculate the total shareholder return, which measures the total return enjoyed by a shareholder over a period of time, taking into account both capital gains and dividends received.

Question 3

What factor, divided by initial share price, is used to calculate total shareholder return?&#10;A) Total dividend &#215; (Share price at the end of the period - Initial share price)&#10;B) Total dividend &#215; (Share price at the end of the period - Initial share price)2&#10;C) Dividend per share + (Share price at the end of the period - Initial share price)&#10;D) Dividend per share &#215; (Share price at the end of the period - Initial share price)2

Accepted Answer

Total shareholder return is calculated by adding the change in share price and any dividends paid out during the period. Therefore, we only need to add the dividend per share to the difference in share price (at the end of the period and the initial share price). Dividing this by the initial share price gives us the total shareholder return.

Deck 18: Capital Structure