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Which THREE of the following offer the greatest potential for enhancing shareholder wealth?
A profit-seeking company intends to acquire another company for a variety of reasons, primarily to enhance shareholder wealth. Which THREE of the following offer the greatest potential for enhancing shareholder wealth?A . Achieving more press coverage for the company.B . Creating new opportunities for employees.C . Achieving greater cultural diversity.D...
Advise the Board of Directors which of the following will be the status of compliance with the loan covenants next year?
A company has in a 5% corporate bond in issue on which there are two loan covenants. • Interest cover must not fall below 3 times • Retained earnings for the year must not fall below $3.5 million The Company has 200 million shares in issue. The most recent dividend...
Which THREE of the following features are likely to be considered negatives by the bank when assessing the company's credit-worthiness?
A new company was set up two years ago using the personal financial resources of the founders. These funds were used to acquire suitable premises. The company has entered into a long-term lease on the premises which are not yet fully fitted out. The founders are considering requesting loan finance...
What percentage reduction in the share price will occur by the end of next year if the interest rate increase and the P/E movement both occur?
A company's current earnings before interest and taxation are $5 million. These are expected to remain constant for the forseeable future. The company has 10 million shares in issue which currently trade at $3.60. It also has a $10 million long term floating rate loan. The current interest rate on...
A company needs to raise $20 million to finance a project.
A company needs to raise $20 million to finance a project. It has decided on a rights issue at a discount of 20% to its current market share price. There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per...
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
CORRECT TEXT A venture capitalist invests in a company by means of buying: • 9 million shares for $2 a share and • 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time. The venture capitalist expects a return on the equity portion of...
How should the increase in the fair value of the forward contract be treated within the financial statements for the year ended 31 December 20X3?
On 31 October 20X3: • A company expected to agree a foreign currency transaction in January 20X4 for settlement on 31 March 20X4. • The company hedged the currency risk using a forward contract at nil cost for settlement on 31 March 20X4. • The transaction was correctly treated as...
If the company enters into the swap and LIBOR remains at 5%, what will the company's interest cost be?
A company currently has a 6.25% fixed rate loan but it wishes to change the interest style of the loan to variable by using an interest rate swap directly with the bank. The bank has quoted the following swap rate: • 5.50% - 5.55% in exchange for LIBOR LIBOR is...
Taking the new project into account, what would the theoretical ex-rights price be?
CORRECT TEXT A listed company is planning to raise $21.6 million to finance a new project with a positive net present value of $5 million. The finance is to be raised via a rights issue at a 10% discount to the current share price. There are currently 100 million shares...
Which THREE of the following are the most likely benefits of the acquisition to Company M's shareholders?
Company M is a listed company in a highly technical service industry. The directors are considering making a cash offer for the shares in Company Q, an unquoted company in the same industry. Relevant data about Company Q: • The company has seen consistent growth in earnings each year since...
