CIMA Exam CIMAPRA19-F03-1 Topic 4 Question 109 Discussion

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

Question #: 109
Topic #: 4

[All CIMAPRA19-F03-1 Questions]

A company needs to raise $20 million to finance a project.

It has decided on a rights issue at a discount of 20% to its current market share price.

There are currently 20 million shares in issuewith a nominal value of $1 and a marketprice of $5per share.

Calculate the terms of the rights issue.

A1 new share for every 4 existing shares

B1 new share for every 20 existing shares

C1 new share for every 5 existing shares

D1 new share for every 25 existing shares

Show Suggested Answer

Suggested Answer: A

Calc_Set2

by Willard at Apr 03, 2025, 04:27 PM

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Mignon

2 days ago

Hmm, I'm not too sure about this one. Maybe option D? Doesn't seem like a lot of shares need to be issued for $20 million. I wonder if the person who wrote this question has ever tried to raise capital before.

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Mendy

2 days ago

I agree with Tommy. The discount of 20% means the new share price will be $4, which is 20% less than the current market price of $5.

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Lashandra

5 days ago

I think option C is the correct answer. The company needs to raise $20 million, and with a 20% discount, the new share price would be $4. With 20 million shares currently in issue, the company would need to issue 5 million new shares to raise the required $20 million.

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Tommy

5 days ago

I think the answer is A) 1 new share for every 4 existing shares.

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