Rights issue – Knowsia

FR – L2 – Q61 – Financial Statement Analysis

Calculate EPS for Year 5 and adjusted EPS for Year 4 for Unity Vaccines Plc after share transactions.

Question

On 1 January Year 5, Unity Vaccines Plc had 5 million ordinary shares in issue. The following transactions in shares took place during the next year.

1 February A 1 for 5 bonus issue

1 April A 1 for 2 rights issue at GH¢1 per share. The market price of the shares prior to the rights issue was GH¢4.

1 June An issue at full market price of 800,000 shares.

In Year 5 Unity Vaccines Plc made a profit before tax of GH¢3,362,000. It paid ordinary dividends of GH¢1,200,000 and preference dividends of GH¢800,000. Tax was GH¢600,500. The reported EPS for Year 4 was GH¢0.32.

Required

Calculate the EPS for Year 5, and the adjusted EPS for Year 4 for comparative purposes.

Answer

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Tags: Bonus Issue, Earnings per share, Financial Statement Analysis, Rights issue, Share Transactions
Level: Level 2

Topic: Financial Statement Analysis

FM – L2 – Q29 – Sources of finance: equity

Calculate the theoretical ex-rights price per share for Kumasi Lubricants Plc's rights issue to fund new equipment.

Question

Kumasi Lubricants Plc wishes to increase its production capacity by purchasing additional plant and equipment at a cost of GH¢3.8 million. The abridged statement of profit or loss for the year ended 30th November 20X6 is as follows:

	GH¢m
Sales turnover	140.6
Profit before interest and taxation	8.4
Interest	6.8
Profit before tax	1.6
Tax	0.4
Profit after taxation	1.2

Earnings per share: 15 cents

In order to finance the purchase of the new plant and equipment, the directors of the company have decided to make a rights issue equal to the cost of the equipment. The shares are currently quoted on the stock exchange at GH¢2.70 per share and the new shares will be offered to shareholders at GH¢1.90 per share.
Required:
(a) Calculate:
(i) the theoretical ex-rights price per share

(ii) the value of the rights on each existing share

(iii) Existing P/E ratio = GH¢2.70 / GH¢0.15 = 18.0

(b) What are the options available to a shareholder who receives a rights offer from a company?

Answer

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Tags: Equity financing, Rights issue, Shareholder options, Stock market
Level: Level 2

Topic: Sources of finance: equity

FM – L2 – Q28 – Sources of finance: equity

Calculate the theoretical ex-rights price per share for a company's 1 for 4 rights issue to finance new plant and equipment.

Question

A company, Kofi Enterprises Plc, wishes to increase its production capacity by purchasing additional plant and equipment. Its statement of profit or loss for the year ended 30th November Year 3 is as follows:

	GH¢m
Sales revenue	224
Profit before interest and taxation	45.5
Interest	11.4
Profit before tax	34.1
Tax	7.7
Profit after tax	26.4

Earnings per share: GH¢0.30

To finance the new investment, Kofi Enterprises Plc will make a 1 for 4 rights issue. The shares are currently quoted on the Stock Exchange at GH¢5.50 per share and the new shares will be offered to shareholders at GH¢4.50 per share.
Ignore the transaction costs of the share issue.

Required:
(A) Calculate the theoretical ex-rights price per share.

(B) Calculate the value of the rights on each existing share.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Equity financing, Rights issue, Share valuation, Stock exchange, Value of rights
Level: Level 2

Topic: Sources of finance: equity

Tag (SQ): Rights issue

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FR – L2 – Q61 – Financial Statement Analysis

Calculate EPS for Year 5 and adjusted EPS for Year 4 for Unity Vaccines Plc after share transactions.

FM – L2 – Q29 – Sources of finance: equity

Calculate the theoretical ex-rights price per share for Kumasi Lubricants Plc's rights issue to fund new equipment.

FM – L2 – Q28 – Sources of finance: equity

Calculate the theoretical ex-rights price per share for a company's 1 for 4 rights issue to finance new plant and equipment.

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Tag (SQ): Rights issue

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FR – L2 – Q61 – Financial Statement Analysis

Calculate EPS for Year 5 and adjusted EPS for Year 4 for Unity Vaccines Plc after share transactions.

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FM – L2 – Q29 – Sources of finance: equity

Calculate the theoretical ex-rights price per share for Kumasi Lubricants Plc's rights issue to fund new equipment.

You're reporting an error for "FM – L2 – Q29 – Sources of finance: equity"

FM – L2 – Q28 – Sources of finance: equity

Calculate the theoretical ex-rights price per share for a company's 1 for 4 rights issue to finance new plant and equipment.

You're reporting an error for "FM – L2 – Q28 – Sources of finance: equity"

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