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F3 Financial Strategy (Online)
A venture capitalist invests in a company by means of buying:
• 9 million shares for $2 a share and
• 8% bonds with a nominal value of $2 million, repayable at par in 3 years' time.
The venture capitalist expects a return on the equity portion of the investment of at
least 20% a year on a compound basis over the first 3 years of the investment.
The company has 10 million shares in issue.
What is the minimum total equity value for the company in 3 years' time required to
satisify the venture capitalist's expected return?
Give your answer to the nearest $ million.
Answer: 34, 35, 34000000, 35000000
A listed company is planning to raise $21.6 million to finance a new project with a
positive net present value of $5 million. The finance is to be raised via a rights issue
at a 10% discount to the current share price. There are currently 100 million shares in
issue, trading at $2.00 each.
Taking the new project into account, what would the theoretical ex-rights price be?
Give your answer to two decimal places.
Answer: 2.02, 2.03
3.Which THREE of the following are likely to be strategic reasons for a horizontal
A. Reduction of risk by building a larger portfolio
B. Acquisition of an undervalued company
C. To achieve economies of scale
D. To secure key parts of the value chain
E. Reduction of competition
4.A company plans to raise $12 million to finance an expansion project using a rights
• Shares will be offered at a 20% discount to the present market price of $15.00 per
• 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?
5.Company T is a listed company in the retail sector.
Its current profit bef