BUS3026W_2009+Tutorial+1

BUS3026W_2009+Tutorial+1 - School of Management Studies...

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School of Management Studies BUS3026W Finance II 2009 Tutorial Due: Week beginning 23 February ______________________________________________________________ Please show all your calculations. 2 Marks will be subtracted for every question not properly attempted. Question 1: Rainbow International needs capital, and has decided to list on the JSE. It appoints Infamous Bank as its underwriter. The following information is of relevance: 6,000,000 shares are sold to the public. The bank charges a fee of R 350,000 for its advisory services. The bank buys all the shares at an issue price of R 1,50 / share. Shares are offered to the public at R 1,75 / share. All shares are taken up and immediately upon listing the price jumps to R2,45. What are: a. The bank’s total net income from this transaction? [3 marks] b. Rainbow’s implicit costs of the IPO? [2 marks] c. Rainbow’s total costs of listing? [2 marks] d. Did the bank do a good job? Explain. [2 marks] Question 2: Silwood Inc. trades in a dealer market.
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This note was uploaded on 06/01/2011 for the course FIN 3026W taught by Professor Drtoerien during the Summer '09 term at University of Cape Town.

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BUS3026W_2009+Tutorial+1 - School of Management Studies...

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