Page 121 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx
P. 121
Financing – Equity finance
Solution
The answer is (C).
A 40% discount to current market price is 60% × $6 = $3.60
Therefore, to raise $250m, 69.44 million shares will have to be issued ($250m/
$3.60). With 140m shares currently in issue, this amounts to (approximately) a
1 for 2 rights issue.
Yield adjusted TERP
= [Cum rights price × N/(N + 1)] + [(Issue price/N + 1) × (Y new/Y old)]
= [$6 × 2/3] + [($3.60/3) × (20/15)]
=$5.60
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