CIMA Exam CIMAPRA19-F03-1 Topic 3 Question 68 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 68
Topic #: 3

[All CIMAPRA19-F03-1 Questions]

A company wishes to raise new financeusing a rights issue to invest in a new project offering an IRR of 10%

The following data applies:

* There are currently 1 million shares in issue at a current market value of $4 each.

* The terms of the rights issue will be $3.50 for 1 new share for 5 existing shares.

* Thecompany's WACC is currently 8%.

Whatistheyield-adjustedtheoreticalex-rightsprice (TERP)?

Give your answer to 2 decimal places.

$ ?

A4.06, 4.060

B4.06, 4.050

Show Suggested Answer

Suggested Answer: C

by Regenia at Apr 24, 2023, 03:53 PM

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11 days ago

Do you think the answer is A) 4.06, 4.060 or B) 4.06, 4.050?

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22 days ago

I agree, it helps determine the fair value of the company's shares after the rights issue.

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26 days ago

I think the yield-adjusted theoretical ex-rights price is important for investors.

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