QUESTION TWO (a) (b) Highlight two factors that are likely to affect the success of a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
QUESTION TWO (a) (b) Highlight two factors that are likely to affect the success of a rights issue. (c) QRS Limited is planning to expand its production capacity as per its marketing strategy as a result of access to new markets. The company requires additional capital of Sh.95,000,000 which it intends to raise through a rights issue. The company's financial year ends on 30 June. Additional information: The company's pre-tax profits for the year ended 30 June 2021 was Sh.177.500,000. This represents a 30% increase over the profits of the previous year. The current market price per share is Sh.12. The rights issue will comprise one share for every four shares held at a rights issue price of Sh.8 per share. The dividend per share for the year ended 30 June 2021 was Sh.0.70. The company expects to pay a dividend per share of Sh.0.90 for the year ending 30 June 2022. Corporate tax rate is 30%. I. 2. 3. 4. 5. Suggested answers available: www.someakenya.com/cpa-revision-kits Required: (0) Probability 0.30 The existing number of ordinary shares before the rights issue. The earnings per share (EPS) and price-earnings (P/E) ratio for the year ended 30 June 2021. (iii) The ex-rights price per share. The following data shows the returns of two stocks, A and B and their respective probabilities of occurrence: Returns of stock A (%) Returns of stock B (%) 10 8 7 13 0.30 0.40 (2 marks) Required: (i) (ii) (iii) The expected returns of stock A and stock B. The standard deviation of the returns of stock A and stock B. 12 CA22 Page 1 Out of 4 7 (1 mark) (4 marks) (3 marks) (2 marks) (3 marks) Suppose that a portfolio is created composed of 70% of stock A and 30% of stock B. Determine this portfolio's risk in terms of portfolio standard deviation. (5 marks) (Total: 20 marks) QUESTION TWO (a) (b) Highlight two factors that are likely to affect the success of a rights issue. (c) QRS Limited is planning to expand its production capacity as per its marketing strategy as a result of access to new markets. The company requires additional capital of Sh.95,000,000 which it intends to raise through a rights issue. The company's financial year ends on 30 June. Additional information: The company's pre-tax profits for the year ended 30 June 2021 was Sh.177.500,000. This represents a 30% increase over the profits of the previous year. The current market price per share is Sh.12. The rights issue will comprise one share for every four shares held at a rights issue price of Sh.8 per share. The dividend per share for the year ended 30 June 2021 was Sh.0.70. The company expects to pay a dividend per share of Sh.0.90 for the year ending 30 June 2022. Corporate tax rate is 30%. I. 2. 3. 4. 5. Suggested answers available: www.someakenya.com/cpa-revision-kits Required: (0) Probability 0.30 The existing number of ordinary shares before the rights issue. The earnings per share (EPS) and price-earnings (P/E) ratio for the year ended 30 June 2021. (iii) The ex-rights price per share. The following data shows the returns of two stocks, A and B and their respective probabilities of occurrence: Returns of stock A (%) Returns of stock B (%) 10 8 7 13 0.30 0.40 (2 marks) Required: (i) (ii) (iii) The expected returns of stock A and stock B. The standard deviation of the returns of stock A and stock B. 12 CA22 Page 1 Out of 4 7 (1 mark) (4 marks) (3 marks) (2 marks) (3 marks) Suppose that a portfolio is created composed of 70% of stock A and 30% of stock B. Determine this portfolio's risk in terms of portfolio standard deviation. (5 marks) (Total: 20 marks)
Expert Answer:
Answer rating: 100% (QA)
Answer a Factors affecting the success of a rights issue 1 Market conditions The success of a rights issue can be heavily influenced by prevailing market conditions A bullish market environment with h... View the full answer
Related Book For
Project Management The Managerial Process
ISBN: 9781260570434
8th Edition
Authors: Eric W Larson, Clifford F. Gray
Posted Date:
Students also viewed these accounting questions
-
The Morgan Company was planning to expand its production facilities. Therefore it acquired one-year options to purchase two alternative sites. Each option cost $5,000 and could not be applied against...
-
For the next year, Halmark is planning to expand its greeting card business beyond the East Coast to the Midwest. Jim estimates Halmark's demand for cards in the Midwest. He estimates that the amount...
-
Grange Retailers Limiteds financial year ends on 30 June each year. The financial controller of Grange Retailers Limited has assembled the following data to assist in the preparation of a cash budget...
-
What is the purpose of using case and case type in the process identification stage?
-
A problem has arisen in the level control loop for the flash separation unit shown in Figure. The level control loop had functioned in a satisfactory manner for a long period of time. However, the...
-
The Verbrugge Publishing Company's 2012 balance sheet and income statement are as follows (in millions of dollars): Balance Sheet Income Statement Net...
-
Yehti Manufacturing (B). Assume all of the same debt and equity values for Yehti Manufacturing in Problem 9, with the sole exception that both A-shares and B-shares have the same voting rightsone...
-
Presented below are two independent situations related to future taxable and deductible amounts resulting from temporary differences existing at December 31, 2008. 1. Pirates Co. has developed the...
-
H= 95% CI = to 9. A random sample of 60 people revealed that 37 of them believed the new mayor was managing her job very well. Use the "Plus Four" method to construct a 90% confidence interval for p,...
-
Compare the forward quotes, money market hedges and options with each other to determine the best exchange rate hedge for France (Complete Table 5 on the separate answer sheet) Calculate the exchange...
-
Police searched Phelps apartment but found no electronics or other evidence. Phelps said he did not own a cell phone and hated technology. However, when searching the premises, a flash drive was...
-
4.-Suppose that 50 and 75 are two elements of a population data set and their z-scores are -3 and 2, respectively. Find the mean and standard deviation. (Please show your work) Answer: = =
-
33. At a hockey game, small foam hockey pucks are launched at a height of 2 m above the ice level by using a special sling shot. How long is a puck in the air if a student in the stands catches it on...
-
Month Labor-Hours Machine-Hours Overhead Costs 1 3,625 6,775 $513,435 2 3,575 7,035 518,960 3 3,400 7,600 549,575 4 3,700 7,265 541,400 5 3,900 7,955 581,145 6 3,775 7,895 572,320 7 3,700 6,950...
-
Eleanor is a young but relatively experienced investor who follows the markets and individual companies closely. She has a high-paying job and a large amount of capital to invest. She should purchase...
-
Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria's owner has determined that the shop...
-
EA9. LO 7.3Cash collections for Wax On Candles found that 60% ofsales were collected in the month of the sale, 30% was collectedthe month after the sale, and 10% was collected the second monthafter 2...
-
Ann hires a nanny to watch her two children while she works at a local hospital. She pays the 19 year-old nanny $125 per week for 48 weeks during the current year. a. What is the employers portion of...
-
Why do organizations use the percent complete instead of the cheaper, easier pseudo-earned value percent approach?
-
Describe the four phases of the traditional project life cycle. Which phase do you think would be the most difficult one to complete?
-
Define a white elephant in project management. Provide a real-life example.
-
Presented below is a draft set of financial statements for Chips Limited. The following additional information is available: 1 Purchase invoices for goods received on 29 June 2016 amounting to 23,000...
-
Why are accounting rules needed when preparing financial statements?
-
An accounting error, which was regarded as significant in nature and size, was not discovered until a later reporting period. How should it be dealt with?
Study smarter with the SolutionInn App