Question Tag: Company Valuation

Search 500 + past questions and counting.
  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management

Explore ethical considerations in capital investment and apply the Black-Scholes model in company valuation.

You have recently taken up employment with Large Plc., a Nigerian company with manufacturing subsidiaries in many countries across Africa. As the Financial Analyst, you report directly to the Managing Director who currently requires briefings on the following areas:

(i) Ethical issues and capital investment decisions,
(ii) Options and company valuation

Required:

a. Explain, with examples, ethical issues that might affect capital investment decisions and discuss the importance of such issues for Strategic Financial Management. (8 Marks)

b. Explain the circumstances in which the Black-Scholes Option Pricing (BSOP) model could be used to assess the value of a company, including the data required for the variables used in the model. (7 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management"

FM – DEC 2023 – L2 – Q1 – Introduction to Financial Management

Explanation of profit maximization vs. wealth maximization, disadvantages and advantages as performance measures, calculation related to rights issue.

a) Shareholders generally look forward to acceleration of the growth rate of their business. They therefore, prefer management report on wealth maximization to profit maximization.
Required:
i) In the light of this, explain the following:

  • Profit maximization. (2 marks)
  • Wealth maximization. (2 marks)

b) Explain to a shareholder THREE (3) inherent disadvantages of using profit as a performance measure and TWO (2) advantages of using wealth maximization as a performance measure. (8 marks)

c) Sobolo Ghana Ltd has taken a strategic decision to expand its scope of operations to enhance revenue growth. A new venture has been identified and requires funding to execute. Management in the light of the above has agreed to raise funding through a rights issue. The rights issue will be done at GH¢6 per share and existing shareholders will receive 2 rights for each 3 shares currently held. The company has 600,000 shares outstanding and they are currently trading at GH¢8 per share.
Required:
i) Calculate the number of new shares to be issued. (3 marks)
ii) Calculate the amount of money raised from the rights issue and the total value of the company after the rights issue. (5 marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – DEC 2023 – L2 – Q1 – Introduction to Financial Management"

FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management

Explore ethical considerations in capital investment and apply the Black-Scholes model in company valuation.

You have recently taken up employment with Large Plc., a Nigerian company with manufacturing subsidiaries in many countries across Africa. As the Financial Analyst, you report directly to the Managing Director who currently requires briefings on the following areas:

(i) Ethical issues and capital investment decisions,
(ii) Options and company valuation

Required:

a. Explain, with examples, ethical issues that might affect capital investment decisions and discuss the importance of such issues for Strategic Financial Management. (8 Marks)

b. Explain the circumstances in which the Black-Scholes Option Pricing (BSOP) model could be used to assess the value of a company, including the data required for the variables used in the model. (7 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management"

FM – DEC 2023 – L2 – Q1 – Introduction to Financial Management

Explanation of profit maximization vs. wealth maximization, disadvantages and advantages as performance measures, calculation related to rights issue.

a) Shareholders generally look forward to acceleration of the growth rate of their business. They therefore, prefer management report on wealth maximization to profit maximization.
Required:
i) In the light of this, explain the following:

  • Profit maximization. (2 marks)
  • Wealth maximization. (2 marks)

b) Explain to a shareholder THREE (3) inherent disadvantages of using profit as a performance measure and TWO (2) advantages of using wealth maximization as a performance measure. (8 marks)

c) Sobolo Ghana Ltd has taken a strategic decision to expand its scope of operations to enhance revenue growth. A new venture has been identified and requires funding to execute. Management in the light of the above has agreed to raise funding through a rights issue. The rights issue will be done at GH¢6 per share and existing shareholders will receive 2 rights for each 3 shares currently held. The company has 600,000 shares outstanding and they are currently trading at GH¢8 per share.
Required:
i) Calculate the number of new shares to be issued. (3 marks)
ii) Calculate the amount of money raised from the rights issue and the total value of the company after the rights issue. (5 marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – DEC 2023 – L2 – Q1 – Introduction to Financial Management"

error: Content is protected !!
Oops!

This feature is only available in selected plans.

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

If you’re not subscribed to a plan, click on the button below to choose a plan