(a) Lexbel PLC generates earnings after tax (PAT) of 20 per cent on shareholders’ funds. Its current capital structure is as follows: £ Ordinary shares of 25p each 300,000 Reserves 400,000 700,000 The board of Lexbel PLC wishes to raise £180,000 from a right issue to expand existing operations. Its return on shareholders’ funds will be unchanged. The current ex-dividend market price of Lexbel PLC is £1.90. Three different rights issue prices have been suggested by the finance director: £1.80, £1.60, and £1.40. (a) Determine the: i. number of shares to be issued, ii. theoretical ex-rights price, iii. expected earnings per share and iv. form of the issue for each rights issue price, and please send the answers within 30 mins
(a) Lexbel PLC generates earnings after tax (PAT) of 20 per cent on shareholders’ funds. Its current capital structure is as follows: £ Ordinary shares of 25p each 300,000 Reserves 400,000 700,000 The board of Lexbel PLC wishes to raise £180,000 from a right issue to expand existing operations. Its return on shareholders’ funds will be unchanged. The current ex-dividend market price of Lexbel PLC is £1.90. Three different rights issue prices have been suggested by the finance director: £1.80, £1.60, and £1.40. (a) Determine the: i. number of shares to be issued, ii. theoretical ex-rights price, iii. expected earnings per share and iv. form of the issue for each rights issue price, and please send the answers within 30 mins
Chapter14: Distributions To Shareholders: Dividends And Repurchases
Section: Chapter Questions
Problem 2STP
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(a) Lexbel PLC generates earnings after tax (PAT) of 20 per cent on shareholders’ funds. Its current
capital structure is as follows:
£
Ordinary shares of 25p each 300,000
Reserves 400,000
700,000
The board of Lexbel PLC wishes to raise £180,000 from a right issue to expand existing operations. Its
return on shareholders’ funds will be unchanged. The current ex-dividend market price of Lexbel PLC is
£1.90. Three different rights issue prices have been suggested by the finance director: £1.80, £1.60, and
£1.40.
(a) Determine the:
i. number of shares to be issued,
ii. theoretical ex-rights price,
iii. expected earnings per share and
iv. form of the issue for each rights issue price, and
please send the answers within 30 mins
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