Please assist with the below 7 questions i need help with this assessment, would appreciate the assistance.
Question 1 of 11
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?
Question 2 of 11
Wheels Pty(Ltd) is a large private company that specialises in refurbishing old tyres. The management plans to raise equity capital. The company wants to list on the JSE and plans to raise R10 billion. The company has 25 million shares outstanding and can issue 25 million more in an offer for subscription. A bank evaluated the value of the company and estimates that a fair value for one share is R1000. If the company takes under-pricing of 20% into account, how many shares would the company have to issue to raise R10 billion through their listing?
A. 2.5 million shares
B. 8.0 million shares
C. 10.0 million shares
D. 12.5 million shares
Question 3 of 11
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?
Question 4 of 11
Company Y has a AAA credit rating from Standard and Poor's. The company can obtain long-term loans from banks, from which it could borrow at the government bond yield rate plus a premium of 5%. The government bond yield is 10%. AAA rated bonds generally have a spread of 2% (200 points) in relation to government bonds. Which financing option should Company Y choose? Choose the most correct option.
A. Long term loans, it carries a lower cost.
B. Long term loans, it carries a higher return.
C. Issue bonds, it carries a lower cost.
D. Issue bonds, it carries a higher return.
Question 5 of 11
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?
B. R500 000
C. R1 000 000
D. R1 500 000
Question 6 of 11
The financial manager (FM) of Toys Ltd. is faced with a decision regarding its capital structure composition. Currently, the structure consists of R50m in debt and R20m in equity, which is higher than the target D/E ratio. The FM can access either more equity, or more debt, to finance future projects, however, it is expected that the cost of debt will increase if more debt is incurred. Analyst reports indicates that the company's current share price is in line with expectations and that the company has little in the way of retained earnings. The FM chooses to issue equity to fund future projects. Which of the following theories best describes the action taken in the given scenario?
A. Market timing
B. Pecking order
Question 7 of 11
Hamada's 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?
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