Question: 1
A company has undertaken a transaction with its shareholders which has hadthe following impact on its financial statements:
* Retained earnings has decreased
* Share capital has increased
* Earnings per share has decreased
* The book value of equity isunchanged
The company has undertaken a:
Question: 2
A venture capitalist invests in a company by means of buying:
* 9million shares for$2 a share and
* 8% bonds with anominalvalue of $2 million, repayableat par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest$million.
$ million.
Question: 3
A company has announced a rights issue of 1 new share for every 4 existing shares.
Relevant data:
* Thecurrentmarketprice per shareis $10.00.
* Rights areto beissued at a 20% discount to the current price.
* The rate of return on the new funds raisedis expected tobe 10%.
* Therate of return on existing funds is5%.
What is the yield-adjustedtheoreticalex-rightsprice?
Give your answer totwodecimal places.
$?
Question: 4
Two companies that operate in the same industry have different Price/Earnings (P/E)ratios as follows:
Which of the following is the most likely explanation of the different P/E ratios?
Question: 5
A venture capitalist invests in a company by means of buying:
* 9million shares for$2 a share and
* 8% bonds with anominalvalue of $2 million, repayableat par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to satisify the venture capitalist's expected return?
Give your answer to the nearest$million.
$ million.
