Tutorial Questions for Week 8 Lecture.pdf

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Tutorial Questions for Week 8 Lecture Chapter 9 Questions (pages 281-282) 4. What are the main advantages of raising equity rather than borrowing? 18. There has been resistance to companies raising funds by a private placement of shares. Describe the advantages and disadvantages to existing shareholders of a private placement. Problems (page 283) 1. Company A has 4 million shares on issue and wishes to raise $4 million by a 1- for-4 rights issue. (a) What is the theoretical value of 1 right if the market price of 1 share (cum rights) is $5? (b) What is the theoretical share price (ex-rights)? (c) Does an investor gain through a rights issue? 3. Katz Pty Ltd is a well-established company whose directors have decided to convert to public company status, make a public share issue and list on the stock exchange. The company needs to raise $7,920,000 to expand its operations. Its prospectus forecasts a dividend of 20 cents per share in its first year as a public company and dividends are expected to grow at 6 per cent per annum indefinitely. Shareholders require a return of 14 per cent per annum and the cost
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  • Spring '19
  • JANE
  • Katz Pty Ltd, Maxwell Ltd

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