A listed companyisplanning to raise $21.6 million to finance a new project with a positive netpresentvalue of $5 million. The finance is to be raised viaarights issue at a 10% discount to the current share price. There arecurrently 100million shares in issue, trading at $2.00 each.
Taking the new project into account, what would thetheoreticalex-rights price be?
Give your answer totwo decimal places.
$?
Company A is planning to acquire Company B.
Company A's managers think they can improve the performance of Company B to the extent that its own P/E ratio should be applied to Company B's earnings.
Relevant Data:
What is the expected synergy if the acquisition goes ahead?
Give your answer to the nearest $ million.
$? million
WhichTHREE ofthe following remain unchanged over the life of a 10 year fixed rate bond?
On 31 October 20X3:
* Acompanyexpectedtoagreea foreign currencytransactioninJanuary20X4 for settlement on 31 March 20X4.
* The companyhedgedthe currency riskusinga forwardcontractat nil costfor settlementon31March 20X4.
* The transaction was correctly treated as a cash flow hedge in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
On 31 December 20X3, thefinancialyear end, thefair value of the forward contractwas$10,000 (asset).
How shouldthe increase in the fair valueof the forward contractbe treated within the financial statements for the year ended 31 December 20X3?
A companyis funded by:
* $40 million of debt (market value)
* $60 million of equity (market value)
The company plans to:
* Issuea bond and usethe funds raisedto buy back shares at their current market value.
* Structure the deal so that the market value of debt becomes equal to the market value of equity.
According to Modigliani and Miller's theory with tax and assuming a corporate income tax rate of 20%, this plan would:
