Question 1
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1.1 Calculate liquidity and working capital ratios from the accounts of a manufacturer of products for the
construction industry, and comment on the ratios,
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| 2011 | 2010 | $million | |
| Revenue | 2 065.0 | 1 788.7 | |
| Cost of sales | 1478.6 | 1304.0 | |
| Gross profit | 586.4 | 484.7 | |
| Current assets | 572.3 | 523,2 | |
| inventory | 119,0 | 109,0 | |
| Receivables (note 1) | 400,9 | 347,4 | |
| Cash at bank and in hand | 52,4 | 66,8 | |
| Creditors falling due within one year | 501,0 | 420,3 | |
| Bank overdraft | 49,1 | 35,3 | |
| Taxes | 62,0 | 46,7 | |
| Payables (note 2) | 389.9 | 338,3 | |
| Net Current Assets | 71,3 | 102,9 |
Notes
|
329,8 236,2 |
285,4 210,8 |
1.2 Seagull can achieve a profit after tax of 20% on the capital employed. At present its capital structure is as follows;
200 000 ordinary shares of $1 each
$200 000
Retained earnings
100 000
300 000
The directors propose to raise an additional $126 000 from a rights issue.
The current share market price is $1, 80.
1.2.1 Calculate the number of shares that must be issued if the rights price is $1,60 $1,50 $1,40 $1,20.
(4)
1.2.2
Calculate the dilution in earnings per share in each case.
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1.2.3 Calculate the price where the rights price is equal to capital employed/share.
(2 )
Question 2
(20)
An entity has the following information in its balance sheet:
| $’000 | ||
| Ordinary shares of 50 cents | 2 | 500 |
| 8% preference shares of $1 each | 1 | 500 |
| 12% unsecured bonds | 1 | 000 |
The ordinary shares are currently quoted at 130c each, the bonds are trading at $72 per $100 nominal and the
preference shares at 52c each. The ordinary dividend of 15c has just been paid with an expected growth rate of
10%. Corporation tax is currently 30%.
Calculate the weighted average cost of capital for this entity.
Attachments:
managerial fi….pdf