1. LPO Limited has 19 million ordinary shares outstanding which were originally issued at $2.16 but now trading at $49. Management is planning to raise extra share capital through a 1-for-3 renounceable rights issue at $39. a) Calculate the theoretical share price,to the nearest cent,following the rights issue. b)If an investor wishes to sell their rights rather than take up the offer, how much can each right be sold for, to the nearest cent?
2. In theory, how is the optimal level of borrowing relative to equity financing for a business determined?
3. Utty Limited wishes to make substantial purchases of long-term assets and is therefore consideringlong-term financing options. What would be the advantages and disadvantages to Utty Limited ofissuing ordinary shares versus borrowing for this purpose?
4. Qwaser Limited, a profitable company that currently pays out 75% of its profit in dividends, is in need of financing over the next two years. Briefly describe four (4) sources of financing that don't require the issuance shares, borrowing or any other form of external financing.