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CIMAPRA19-F03-1 Exam - Topic 4 Question 112 Discussion

A company plans to raise $12 millionto finance an expansion project using a rights issue.Relevant data:* Shares will be offered at a 20% discountto the present market price of $15.00 per share.* There are currently 2 million shares in issue.* The project is forecast to yield a positive NPV of $6 million.What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?
A) $16.00
B) $14.00
C) $9.00
D) $11.00

CIMAPRA19-F03-1 Exam - Topic 4 Question 112 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 112
Topic #: 4
[All CIMAPRA19-F03-1 Questions]

A company plans to raise $12 millionto finance an expansion project using a rights issue.

Relevant data:

* Shares will be offered at a 20% discountto the present market price of $15.00 per share.

* There are currently 2 million shares in issue.

* The project is forecast to yield a positive NPV of $6 million.

What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?

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Suggested Answer: A

Calc_Set3


by Leigha at Jul 05, 2025, 10:08 AM

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Desiree
7 months ago
Totally agree, $11.00 makes sense with the discount!
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Bong
7 months ago
I think the new price will be around $11.00.
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Joanne
7 months ago
The shares are offered at a 20% discount, so that's $12 each.
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Jody
8 months ago
Wait, how does a $6 million NPV fit into this?
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Ligia
8 months ago
Not sure about that, $9.00 seems too low for a rights issue.
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Oretha
8 months ago
I feel like the NPV of the project might play a role in determining the value, but I'm not entirely sure how it integrates into the ex-rights price calculation.
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Becky
8 months ago
This question seems similar to one we practiced where we had to adjust for new shares issued. I hope I can remember the steps correctly.
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Jean
8 months ago
I think the discount on the shares will affect the ex-rights price, but I can't recall how to factor that into the calculation.
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Darnell
9 months ago
I remember we calculated the theoretical ex-rights price in class, but I'm a bit unsure about the exact formula to use here.
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Kristel
9 months ago
Whoa, this is a lot of information to process. I better take it step-by-step and make sure I'm not missing anything crucial in the calculations.
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Laura
9 months ago
Ah, a rights issue question. I'm confident I can handle this - I've practiced similar problems before. Time to put my knowledge to the test.
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Mabel
9 months ago
Okay, I think I've got this. I just need to plug the numbers into the right formula and do the math. Should be straightforward if I can remember the steps.
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Lynna
9 months ago
Hmm, I'm a bit unsure about how to approach this. I'll need to review the formulas for rights issues and make sure I understand the key variables.
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Adela
9 months ago
This looks like a tricky question on rights issues. I'll need to carefully work through the calculations to determine the theoretical ex-rights price.
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Milly
11 months ago
Hmm, maybe I should reconsider my answer then
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Mollie
11 months ago
I agree with Derick, the discount should impact the price
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Peggie
11 months ago
Wait, is this a trick question? Nah, can't be. B) $14.00 is the clear winner here. Time to show off my finance skills!
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Deangelo
12 months ago
Ooh, a rights issue question! My favorite. B) $14.00 is the way to go, easy peasy.
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Derick
12 months ago
But wouldn't the discount affect the price differently?
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Milly
12 months ago
I believe it's B) $14.00
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Dong
12 months ago
Ah, the good old rights issue problem. I remember this one from my studies. The answer has to be B) $14.00, no doubt about it.
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Bok
12 months ago
Hmm, this seems straightforward enough. Let me think this through... Yep, B) $14.00 is the correct answer.
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Nan
11 months ago
Yes, the answer is definitely B) $14.00.
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Hermila
11 months ago
I agree, it should be $14.00 after the rights issue.
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Cruz
12 months ago
I think the yield-adjusted Theoretical Ex-Rights Price is $14.00
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Merilyn
1 year ago
This question is a classic in corporate finance! I'm pretty sure the answer is B) $14.00.
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Ronnie
11 months ago
No, I'm pretty sure it's B) $14.00. The discount and NPV should be factored in.
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Theodora
12 months ago
I think the answer is actually A) $16.00.
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Derick
1 year ago
I think the answer is A) $16.00
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