Wordy Topics

Question 1

5 Political Risks

Answer 1

• Nationalisation
• Tariffs
• Quotas
• Restrictions
• Non-Tariff barriers

Question 2

Political Risk - Tariffs

Answer 2

Extra taxes on imports

Question 3

Political Risk - Quotas

Answer 3

Limits on quantities

Question 4

Political Risk - Restrictions

Answer 4

Min Shareholdings and no foreign ownership

Question 5

Political Risk - Non-Tariff Barriers

Answer 5

Extra quality and safety checks

Question 6

How to manage Political Risks

Answer 6

• Insurance
• Operate as joint venture
• Agree Concessions
• Produce/ Contract locally

Question 7

4 Environmental Cost Classifications

Answer 7

1. Prevention Costs
2. Appraisal Costs
3. Internal Failure
4. External Failure

Question 8

Environmental Cost Classifications - Prevention costs

Answer 8

Stop impact
e.g Staff training

Question 9

Environmental Cost Classifications - Appraisal Costs

Answer 9

Monitoring
e.g Onsite Inspections

Question 10

Environmental Cost Classifications - Internal Failure

Answer 10

Internal Waste
e.g Waste Disposal

Question 11

Environmental Cost Classifications - External Failure

Answer 11

External Waste
e.g Fines

Question 12

Predictive Analytics

Answer 12

Use historic or current data to predict the future

Question 13

Prescriptive Analytics

Answer 13

AI/algorithms to calculate best business decision

Question 14

Prescriptive Analytics - Advantages

Answer 14

Gives a decision in complex decisions

Question 15

Prescriptive Analytics - Disadvantages

Answer 15

Advanced data science skills required and only as reliable as input data

Question 16

What is the Monte Carlo Simulation

Answer 16

Hundreds of NPVs for 1 scenario which alter variables each time

To achieve the most common NPV and a range of possible ones

Question 17

Monte Carlo Simulation - Advantages

Answer 17

• Shows spread
• Useful for problem solving

Question 18

Monte Carlo Simulation - Disadvantages

Answer 18

• No decision
• Expensive
• Computer-based
• Probability assumptions

Question 19

Loan Stock with Warrant

Answer 19

a loan that comes with a separate call option

Question 20

Types of Green Financing

Answer 20

Green Bonds - fixed interest
Green loans - Loans for green projects
Green Funds - Investors target socially responsible companies
Sustainability linked loans - cheaper if sustainability targets are met

Question 21

3 Efficient Market Hypothesis

Answer 21

1. Weak Form
2. Semi- Strong
3. Strong Form

Question 22

Weak Form Efficient Market Hypothesis

Answer 22

SP reflect - Past info
Beat Market By - Analysis of forecasts
When a positive NPV project is in SP - Value is evidenced

Question 23

Semi-Strong Efficient Market Hypothesis

Answer 23

SP reflect - Public info
Beat Market By - Insider Trading (Illegal)
When a positive NPV project is in SP - Announced

Question 24

Strong Form Efficient Market Hypothesis

Answer 24

SP reflect - All info
Beat Market By - Luck
When a positive NPV project is in SP - Board agree to project

Question 25

Practical Consideration for Capital Structure

Answer 25

• Impacts on control
• Competitor’s structures
• Shareholders’ Opinion
• Assets for security
• Availability
• Cost
• Tax rate
• Financial risk
• Debt covenants