CIMAPRA19-F03-1 Exam - Topic 7 Question 9 Discussion

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

Question #: 9
Topic #: 7

The Board of Directors of Company T is considering a rights issue to fund a new investment opportunity which has a zero NPV.

The Board of Directors wishes to explain to shareholders what the theoretical impact on their wealth will be as a result of different possible actions during the rights issue.

Which THREE of the following statements in respect of theoreticalshareholder wealth are true?

AIf shareholders exercise their full rights there will be no impact on their wealth.

BIf the shareholders allow their rights to lapse (do nothing) there will be no impact on their wealth.

CIf shareholders sell their entire rights entitlement there will be no impact on their wealth.

DIf the shareholders only partially exercise their rights and allow the remainder to lapse there will be no impact on their wealth.

EIf shareholders partially exercise their rights and sell the remaining rights entitlement there will be no impact on their wealth.

Show Suggested Answer

Suggested Answer: A, C, E

by Xuan at May 08, 2022, 09:33 AM

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7 months ago

Okay, I think I've got this. The key is to use the right stream type to handle the average calculation.

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