F3 Exam Dumps : Financial Strategy

The ex div share price of Company A’s shares is $.3.50

An investor in Company A currently holds 2,000 shares.

Company A plans to issue a script divided of 1 new shares for every 10 shares currently held.

After the scrip divided, what will be the total wealth of the shareholder?

Give your answer to the nearest whole $.

A listed company plans to raise $350 million to finance a major expansion programme.

The cash flow projections for the programme are subject to considerable variability.

Brief details of the programme have been public knowledge for a few weeks.

The directors are considering two financing options, either a rights issue at a 20% discount to current share price or a long term bond.

The following data is relevant:

The company's share price has fallen by 5% over the past 3 months compared with a fall in the market of 3% over the same period.

The directors favour the bond option.

However, the Chief Accountant has provided arguments for a rights issue.

Which TWO of the following arguments in favour of a right issue are correct?

VVV has a floating rate loan that it wishes to replace with a fixed rate. The cost of the existing loan is the risk-free rate + 3%. VW would have to pay a fixed rate of 7% on a fixed rate loan VVVs bank has found a potential counterparty for a swap arrangement.

The counterparty wishes to raise a variable rate loan It would pay the risk-free rate +1 % on a variable rate loan and 8% on a fixed rate.

The bank will require 10% of the savings from the swap and WV and the counterparty will share the remaining saving equally.

Calculate VWs effective rate of interest from this swap arrangement.