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Assuming all shareholders take up their rights, how much new finance will be raised ?
CORRECT TEXT A company wishes to raise new finance using a rights issue. The following data applies: • There are 10 million shares in issue with a market value of $4 each • The terms of the rights will be 1 new share for 4 existing shares held • After...
Which THREE of the following are relevant cashflows in the lease-or-buy appraisal?
A company is undertaking a lease-or-buy evaluation, using the post-tax cost of bank borrowing as the discount rate. Details of the two alternatives are as follows: Buy option: • To be financed by a bank loan • Tax depreciation allowances are available on a reducing-balance basis • Assets depreciated on...
Advise the Board of Directors which of the following is a reasonable estimate of a range of values of the entire share capital in the event of a bid being made for the whole company?
The Board of Directors of a listed company wish to estimate a reasonable valuation of the entire share capital of the company in the event of a takeover bid. The company's current profit before taxation is $4.0 million. The rate of corporate tax is 25%. The average P/E multiple of...
Assuming no other influence on share price, what is the expected share price following the scrip dividend?
CORRECT TEXT A listed company follows a policy of paying a constant dividend. The following information is available: • Issued share capital (nominal value $0.50) $60 million • Current market capitalisation $480 million The shareholders are requesting an increased dividend this year as earnings have been growing. However, the directors...
Which of the following best explains why external consultants have recently advised the company to apply hedge accounting?
A private company manufactures goods for export, the goods are priced in foreign currency B$. The company is partly owned by members of the founding family and partly by a venture capitalist who is helping to grow the business rapidly in preparation for a planned listing in three years' time....
A company is valuing its equity prior to an initial public offering (IPO).
A company is valuing its equity prior to an initial public offering (IPO). Relevant data: • Earnings per share $1.00 • WACC is 8% and the cost of equity is 12% • Dividend payout ratio 40% • Dividend growth rate 2% in perpetuity The current share price using the Dividend...
Using only the relevant data, which of the following is correct?
A project requires an initial outlay of $2 million which can be financed with either a bank loan or finance lease. The company will be responsible for annual maintenance under either option. The tax regime is: • Tax depreciation allowances can be claimed on purchased assets. • If leased using...
In a semi-strong efficient stock market, which of the following is the most likely share price immediately after the announcement of the new investment?
A company has: • 10 million $1 ordinary shares in issue • A current share price of $5.00 a share • A WACC of 15% The company holds $10 million in cash. No interest is earned on this cash. It will invest this in a project with an expected NPV...
Which of the following statements best describes a residual dividend policy?
Which of the following statements best describes a residual dividend policy?A . Dividends are paid only after the on-going operational needs of the business have been met.B . Dividends are paid only if no further positive NPV projects are available.C . All surplus earnings are invested back into the business.D...
Company P is a pharmaceutical company listed on an alternative investment market.
Company P is a pharmaceutical company listed on an alternative investment market. The company is developing a new drug which it hopes to market in approximately six years' time. Company P is owned and managed by a group of doctors who wish to retain control of the company. The company...
