Corporate Finance Coursework

Subject Code    : 4ACC0812

Due Date    : Friday 14^th Nov. 08

Year

2008

Exam Period

December

 

Subject	DIA - Business Finance and DIBA – Corporate Finance
Weightage	30%	Submission Date	14-Nov-2008

 

Question 1

Montana Berhad wishes to raise RM80 million via a rights issue to its existing shareholders.

(1.1) Explain what is a Rights Issue. How is a Rights Issue different from a Bonus Issue ?

(4 marks)

(1.2) Illustrate by way of examples, THREE different options available to an existing shareholder holding a few lots of Montana Berhad shares and the impact each option has on his wealth.

(6 marks)

Question 2

Four projects are being considered for recommendation. RM40 million worth of capital has been raised. The cost of capital is 12% p.a.

Each project has projected cash-flows (in $' 000) as follows :

(2.1) Compute the payback periods for each project and determine by ranking which project(s) should be chosen based on this criterion.

(2 marks)

(2.2) Compute the net present values (NPV) for each project and determine by ranking which project(s) should be chosen based on this criterion

(5 marks)

(2.3) Compute the internal rate of return (IRR) for each project and determine by ranking which project(s) should be chosen based on this criterion

(7 marks)

(2.4) On the basis of maximizing shareholder wealth, which projects should you recommend to be selected. Give reasons.

(6 marks)

 

(Total : 30 marks)