Shares

If a company wishes to raise R2 million through a rights issue at a subscription price of R100 each, while its 20 000 outstanding shares trade at R 150 apiece, what would the theoretical value of its shares after issue be?

A. R100

B. R125

C. R150

D. R200

Lights Ltd. has raised funds by way of a bank loan. The bank loan came with a covenant of the company maintaining a debt ratio of 0.5. The company currently has total assets of R1 000 000 and total liabilities of R500 000. How much more can the company borrow without breaching its covenant?

A. R0

B. R500 000

C. R1 000 000

D. R1 500 000

Hamadas equation can be used to estimate the change of beta resultant from a change in leverage. Suppose a company has a beta of 2,00 with a debt/equity ratio of 2 and that the applicable tax rate is 28%. What would the unlevered beta be for the company as determined by the equation?

A. 0.29

B. 0.82

C. 1.00

D. 2.00

When listing on the JSE (Johannesburg Stock Exchange), JPe Ltd. wishes to have a full subscription and a successful share issue. The company values its shares at R50 apiece. Expert investors and insiders value the share at R44 apiece. At what price should JPe Ltd. offer their shares in order for them to have the best chance of a full subscription?

A. R40

B. R45

C. R50

D. R60