P1 Managerial Finance Revision Weekend Question Pack
Q3 (a) Pilot Paper:
Question: Geronimo Inc. Geronimo Inc. currently has 5 million ordinary shares in issue, which have a market value of €1.60 each. The company wishes to raise finance for a major investment project by means of a rights issue, and is proposing to issue shares on the basis of 1 for 5 at a price of €1.30 each. James Brown currently owns 10,000 shares in Geronimo Inc. and is seeking advice on whether or not to take up his proposed rights. Required: (a) Explain the difference between a rights issue and a scrip issue. Your answer should include comment on the reasons why companies make such issues and the effect of the issues on private investors. (b) Calculate (i) the theoretical value of James Brown’s shareholding if he takes up his rights (ii) the theoretical value of James Brown’s shareholding if he chooses to sell them Total: 15 marks
Q1 April 2012:
Q1 Aug 2009:
Q5 (b) April 2009
Q4 Aug 2009:
Q4 Aug 2010:
Q2 April 2012:
Q2 Pilot Paper
Q1 April 2009:
Q3 April 2009:
Q2 April 2011
Q5 (b) Aug 2008
Q5 (a) Aug 2008:
Q3 (a) April 2008:
Q5 (b) April 2008:
