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1) To calculate capital gain or loss correct way is
New share price – old share price
OR
Old share price – new share price2) In calculating number of RI shares by formula cash generated/RI price per share, here in cash generated do we deduct issue cost of RI or not?
3) As formula for return on equity or return on shareholders fund is earnings/shareholders fund. Here by earnings do we mean PAT or do we mean PAT -preference dividend?
While calculating shareholders funds do we use market values or book values?1. I cannot believe you are asking this! It is the new share price less the old share price.
2. It depends on whether the question says that the cash to be raised is before or after the indue cost
3. It is earnings after preference dividends (i.e earnings available for ordinary shareholders). Preferable you would use market values, but it depends on whether or not you are told the market value (and whether the question specifies doing it on book values).
Sir in whole FM syllabus, whenever question says that e.g company A has total earnings of $50000, so by earnings its always mean PAT and Pref.dividend rather than just PAT?
Sir if the issue cost is not given in Qs then we will just do cash generated / RI price per share. However, if the issue cost is mentioned in question then will we deduct issue cost from cash generated?
No – it depends on how to question is defining earnings!!!
If there is no mention of issue costs the the number of shares issued will be the cash raised divided by the issue price per share.
If there are issue costs, then as I wrote in my previous reply, it depends on whether the question says that the money raised has to cover the issue costs as well as the amount needed for investment, or not.
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