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CIMAPRA19-F03-1 Exam - Topic 3 Question 88 Discussion

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.
A) 1 new share for every 4 existing shares and B) 1 new share for every 20 existing shares and D) 1 new share for every 25 existing shares
C) 1 new share for every 5 existing shares

CIMAPRA19-F03-1 Exam - Topic 3 Question 88 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 88
Topic #: 3
[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.

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Suggested Answer: A, B, D

by Lyda at May 30, 2024, 07:00 PM

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Jolene
8 months ago
I thought it might be A at first, but C makes more sense.
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Jettie
8 months ago
Just did the numbers, and yep, it's definitely C!
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Deeanna
8 months ago
Wait, are we sure about that? Seems off.
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Chantell
8 months ago
Totally agree, that math checks out!
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Ailene
9 months ago
It's 1 new share for every 5 existing shares.
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Whitney
9 months ago
I think the answer could be option C, but I’m not entirely sure how to break down the calculations. I wish I had practiced more with these types of questions!
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Ruthann
9 months ago
I feel like I might be overthinking this. Is it 1 new share for every 5 existing shares? That seems to fit with the numbers, but I’m not completely confident.
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Ciara
9 months ago
If the market price is $5 and they’re offering a 20% discount, that makes it $4 per new share. I think we need to figure out how many shares they need to issue to raise $20 million.
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Mila
9 months ago
I remember we practiced a similar question about rights issues, but I’m not sure how to calculate the exact terms here.
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Iluminada
9 months ago
I feel confident I can solve this. I just need to do the math carefully and double-check my work.
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Giuseppe
9 months ago
I've seen questions like this before. I think the key is to calculate the new share price after the discount, then use that to determine the number of new shares that need to be issued.
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Elliot
9 months ago
Hmm, I'm a bit unsure about how to approach this. The discount and the number of new shares to issue are the key pieces of information I need to figure out.
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Madalyn
9 months ago
Okay, let's break this down step-by-step. We have the total amount to raise, the discount, and the current share details. I think I can work this out.
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Krissy
9 months ago
This looks like a straightforward calculation, but I want to make sure I understand all the details before I start.
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Ling
10 months ago
Hmm, I'm a bit unsure about this one. I'll need to review the GDPR requirements and think through the implications of each approach before deciding.
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Jina
1 year ago
I don't know about you, but I'm just here for the free snacks. What do you mean there's a test? I thought this was a party!
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Dianne
1 year ago
Seriously, you guys are overthinking this. The answer is clearly C. 1 new share for every 5 existing shares. It's simple math, really. Although, I do have to admit, the 20% discount is a nice perk.
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Bethanie
1 year ago
I'm with you on this one, it's option C. The discount makes it even better.
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Lynelle
1 year ago
I think it's option A. Are you sure about C?
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Dulce
1 year ago
I agree, it's definitely option C. The discount is a good deal.
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Adolph
1 year ago
I don't know, you guys. This is a bit tricky. Let me think this through... Okay, I've got it! The answer has to be D. 1 new share for every 25 existing shares. Trust me, I'm an expert at these types of questions. (Or am I?)
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Clarence
1 year ago
I think you might be onto something. I'll go with C) 1 new share for every 5 existing shares.
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Nadine
1 year ago
I'm not convinced. I believe the correct answer is B) 1 new share for every 20 existing shares.
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Rachael
1 year ago
Are you sure about that? I think the answer might be A) 1 new share for every 4 existing shares.
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Glenn
1 year ago
Wait, wait, wait... Did you see that market price of $5 per share? That means the discounted price will be $4 per share. I'm going with option A, 1 new share for every 4 existing shares. This is going to be easy money!
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Lucy
1 year ago
Let's go with option A, 1 new share for every 4 existing shares. It seems like a good opportunity to raise the necessary funds.
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Bettye
1 year ago
I agree, option A seems like the most logical choice based on the information provided.
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Cherry
1 year ago
I think you're right, the discounted price will be $4 per share. Option A sounds like the best choice.
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Devorah
1 year ago
Okay, let's see... Hmm, I think the answer is C. 1 new share for every 5 existing shares. That seems to make the most sense given the discount and the number of shares in issue.
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Berry
1 year ago
I'm not sure, but I think the answer is C) 1 new share for every 5 existing shares. Can someone explain the rationale behind the correct answer?
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Loreen
1 year ago
I agree with Casie. It makes sense because the company needs to raise $20 million and the discount is 20%.
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Casie
1 year ago
I think the answer is A) 1 new share for every 4 existing shares.
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