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- This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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- November 30, 2015 at 10:30 am #286363
Hi sir,
Im sorry for the long question. There are 4 questions basically. Unfortunately the answers have no explanation .Can you please solve them for me?
This data relates to question 1-4A company is investing $70m in a new project and will be funding part of the investment by debt
and the remainder by equity through a rights issue. The current share price is $4 and the market
capitalisation is $200m. The rights issue price will be at a discount of 20% to the current share
price. The rights issue will be on a 1 for 5 basisIssue costs are expected to be $2m. Current equity gearing (debt/equity) is 40%
Q1 How many new shares will be issued?
A 5 million
B 10 million
C 50 million
D 60 million
Q2 How much gross funding is raised by the rights issue?
A $16m
B $20m
C $32m
D $40m
Q3 What is the theoretical ex rights price?
A $3.87
B $4.00
C $4.64
D $5.00
Q4 What is the revised equity gearing of the company?
A 40.0%
B 42.9%
C 40.7%
D 41.5%
November 30, 2015 at 11:54 am #286397I am sorry, but we cannot simply provide answers to a long list of test questions. You should insist of getting explanations from wherever you got the questions. If you then do not understand the workings then by all means ask – say which bit you do not understand and I will try and help.
Everything you need to answer these questions is explained in full in our free lectures (they are a complete course for Paper F9 and cover everything you need to pass the exam well).
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