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Individual work assignments: Suggested answers in .NET Insert barcode data matrix in .NET Individual work assignments: Suggested answers

Individual work assignments: Suggested answers using barcode writer for .net vs 2010 control to generate, create barcode data matrix image in .net vs 2010 applications. isbn bookland ean this would purchase 71 shar .net framework gs1 datamatrix barcode es with a small remainder of $4. The difference between the two methods is simply a rounding effect.

e. The rights issue strike price of $6.52 per share would be unaffected by the assumed return from the money raised.

What would change would be the ex-rights price and all the other things that depend on this. So answer (a) is unchanged but (b) (d) will be changed. The calculation for these is as follows.

If each dollar invested was expected to generate $0.40 of NPV then the total additional NPV would be $300m. The revised market capitalisation after the rights issue would be $7.

3bn. With 690m shares the share price would be $10.58 per share.

The 200 rights would be worth 200 x $4.06 = $812. To maintain the investment we are no longer able to apply the law of conservation of value because we are now assuming that the company will create value as a result of the announcement of the rights issue and the associated value-creating investment.

To maintain the original value invested in the company we must hold shares worth $10,870. Given the share price of $10.58 this means holding 1,027 shares.

The 27 additional shares required would cost $286. So where, one might wonder, has the remaining $526 come from The answer is that it comes from the $300m value creation that is anticipated from the investments that will be funded by the rights issue. This gain is our hypothetical shareholder s share of this since this shareholder owns 1,000 of the 575m shares in issue.

So value is actually conserved provided one allows for this effect (once again subject to very minor rounding effects). 10. A company is planning to buy a high-temperature moulding machine that will manufacture kitchen utensils.

The machine will cost $2.5m and the company is seeking a bank loan of $2.0m to help fund this purchase.

The remaining $0.5m will come from a cash injection from the company s owner. How would a bank view the security on this loan and how might it respond to the loan request in the following situations a.

The company was a new start-up and had no other assets at the present time. b. The company already had two similar machines and a four year track record of profitable growth.

These machines had been purchased thanks to loans which were guaranteed by the founder s rich uncle. Loan repayments were being made on schedule but $1m was still outstanding. c.

The company was as outlined in (b) above but following the recent sudden death of the rich uncle, the owner had inherited $4m. d. The company owns several similar machines and also a factory building worth $3m and currently has no debt.

e. The company is as outlined in (d) but the lender has just learned that although the facts presented are true, the company only recently repaid a $3m overdraft from another bank. Banks would not like the lack of security in situation (a).

The bank might consider the second-hand value of the machine as providing some cover provided it held a mortgage on it. The bank would also want to understand the full business plan for this new company. For example, how was it going to finance the necessary working capital Situation (b) is more favourable.

The bank would want to see the full accounts for the company and may consider there was enough security for a further loan. It is likely, however, that the bank would once again ask for a guarantee from the rich uncle..

Building block 2: Financial markets Situation (c) illustrates h 2d Data Matrix barcode for .NET ow things can change and the sorts of things that banks will think about. The death of a guarantor is the sort of thing that loan agreements will allow for.

The bank may well have the right to request its loans to be repaid on the uncle s death. The bank might well ask the owner to use some of the $4m to fund the machine s purchase. If the bank did give a loan it would probably want to know how the $4m was going to be invested and whether it could gain some kind of financial lien over it.

A bank would not simply accept that because the owner of a company was rich then it was safe to lend to a company. This is because the owner has no legal obligation to fund the company s debts. Situation (d) looks favourable from the perspective of a bank.

In particular there is a factory building which on its own is worth more than the total loan that is being requested. The strongest link principle might well mean that the bank would give a loan if it was given a mortgage on the building. Finally, situation (e) reminds us again of all the things that must be considered before a bank can be sure that a loan is secure.

Has the company perhaps simply repaid its bank loans by not paying its suppliers If so, then perhaps it is not as secure as one might think. 11. The chief financial officer of a company is contemplating whether to recommend that it should declare its first cash dividend.

The company was floated on the stock exchange four years ago and since then has retained all of its profits in order to fund its growth. The company has been very successful and has just paid off the initial overdraft that it had. It has no other debts.

The plan for next year, however, shows that the business operations will not generate any cash owing to the capital investment budget s using of all of the anticipated cash flow from operations. Summarise the main pros and cons for declaring a first cash dividend. In favour of paying a dividend: A good signal to the stock market that the company is confident of its future prospects and can afford to start paying cash dividends.

Sooner or later, all companies should pay cash dividends. The transition would be taken by the market as a positive sign of success. If the company now has no debt this means that it is entirely reasonable for it to borrow some money if only to achieve a more flexible finance pool and the debt tax shield.

Against paying a dividend: This may be too early to start paying because it would look bad if, having started paying cash dividends, the company then had to stop. The company might need additional growth funds in the next year or so, and so retaining equity at this time could be sensible. The market might interpret the change as a signal that growth prospects were not as good as anticipated and this could lower the share price if the growth had been expected to be value-creating.

The company might be exposed to downside risks and need a bigger equity cushion before it could afford to pay a dividend. Overall, as we can see, the answer will depend on how the company presents the situation. If it presents whatever it decides in a positive light the share price may go up.

If, however, its presentation is not liked by the market the share price could fall..
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