Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

CIMAPRA19-F03-1 Exam - 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.

$ ?

Show Suggested Answer Hide Answer
Suggested Answer: C

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

Limited Time Offer

25%

Off

Get Premium CIMAPRA19-F03-1 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Nu
5 months ago
Totally agree, $4.06 makes sense with those numbers!
upvoted 0 times
...
Elin
5 months ago
Wait, how can the TERP be higher than the current price? Seems off.
upvoted 0 times
...
Brittney
6 months ago
I think the TERP will be around $4.06.
upvoted 0 times
...
Dong
6 months ago
That IRR of 10% sounds promising!
upvoted 0 times
...
Albina
6 months ago
The current market value is $4, and the rights issue is at $3.50.
upvoted 0 times
...
Lashonda
6 months ago
I believe the rights issue price is lower than the current market price, which should affect the TERP. I hope I remember the calculations correctly!
upvoted 0 times
...
Laurel
6 months ago
I'm a bit confused about how to weigh the new shares against the existing ones. Do we just divide the total value by the total number of shares after the issue?
upvoted 0 times
...
Elenor
6 months ago
I remember a similar question where we had to find the TERP after a rights issue. I think we add the market value of existing shares to the value of new shares issued.
upvoted 0 times
...
Jina
6 months ago
I think we need to calculate the total value of existing shares and the new shares to find the TERP, but I'm not entirely sure about the formula.
upvoted 0 times
...
Carlota
6 months ago
Okay, let me see. A Spring Boot starter dependency is probably some kind of pre-configured set of dependencies that makes it easier to set up a Spring Boot project, right? I think option D sounds like the best description of that.
upvoted 0 times
...
Linette
6 months ago
I'm pretty confident I know the right answer here. Minimizing up-front effort is definitely the wrong approach for AI in a network.
upvoted 0 times
...
Julio
6 months ago
Okay, let's see. I know HTTP is for regular web traffic, not encrypted content. SMB is for file sharing, not encryption. I'm going to go with B - Secure copy.
upvoted 0 times
...
An
7 months ago
I'm a bit confused by this question. There are a few different options presented, and I'm not sure which one would be the best approach. I might start by reviewing the SQL Server Profiler-based traces, as that could provide some useful insights. But I'll need to think it through carefully before making a decision.
upvoted 0 times
...
Ailene
11 months ago
Wait, is the answer supposed to be $4.20? I'm pretty sure that's the correct answer. What do you mean, 'not a valid option'? Clearly, the exam writers need to brush up on their financial calculations.
upvoted 0 times
Dean
9 months ago
Oh, I see. Thanks for clarifying!
upvoted 0 times
...
Dexter
9 months ago
Actually, the answer is A) 4.06, 4.060. You were close though!
upvoted 0 times
...
Coral
9 months ago
No, I believe the correct answer is B) 4.06, 4.050
upvoted 0 times
...
Lore
9 months ago
I think the answer is A) 4.06, 4.060
upvoted 0 times
...
...
Britt
11 months ago
I'm just glad they're not asking me to calculate the intrinsic value of the company. That would be a real brain-teaser. This TERP thing seems like a piece of cake in comparison.
upvoted 0 times
...
Shenika
11 months ago
Hmm, I wonder if the IRR of 10% on the new project has any bearing on the TERP calculation. Maybe I should factor that in somehow. Time to break out the financial calculator!
upvoted 0 times
Gregoria
10 months ago
User 3: Let's use the financial calculator to factor in the IRR and get the accurate TERP.
upvoted 0 times
...
Bethanie
10 months ago
User 2: I agree, we should consider that when calculating the yield-adjusted theoretical ex-rights price.
upvoted 0 times
...
Erinn
10 months ago
User 1: I think the IRR of 10% on the new project does impact the TERP calculation.
upvoted 0 times
...
...
Jenelle
11 months ago
Hold on, I need to double-check the formula for TERP. Isn't it something like (Current Shares * Current Price + New Shares * Rights Issue Price) / (Current Shares + New Shares)? This seems straightforward enough.
upvoted 0 times
Hassie
10 months ago
Great, thanks for confirming. I'll go ahead and calculate the yield-adjusted theoretical ex-rights price using that formula.
upvoted 0 times
...
Elliot
10 months ago
So, for this scenario, the TERP would be $4.06.
upvoted 0 times
...
Jolanda
10 months ago
Yes, that's correct. The formula for TERP is (Current Shares * Current Price + New Shares * Rights Issue Price) / (Current Shares + New Shares).
upvoted 0 times
...
...
Christoper
11 months ago
Okay, let's see if I can figure this out. The current market value is $4 per share, and the rights issue price is $3.50 for 1 new share for 5 existing shares. With a WACC of 8%, the TERP should be somewhere between the two, right? I'll give it a shot.
upvoted 0 times
Angelica
11 months ago
B) 4.06, 4.050
upvoted 0 times
...
Lilli
11 months ago
A) 4.06, 4.060
upvoted 0 times
...
...
Kimbery
12 months ago
Do you think the answer is A) 4.06, 4.060 or B) 4.06, 4.050?
upvoted 0 times
...
Melodie
1 year ago
I agree, it helps determine the fair value of the company's shares after the rights issue.
upvoted 0 times
...
Kimbery
1 year ago
I think the yield-adjusted theoretical ex-rights price is important for investors.
upvoted 0 times
...

Save Cancel