Private placement – NBC Institute

FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets

Compare bond issuance methods, steps for IPO success, and Efficient Market Hypothesis application.

Question

A pharmaceutical company wholly owned by the family of Chief Adedutan Jolomi has been in business for many years. The directors have decided to seek quotation on the Alternative Securities Market (ASEM).

A new drug on Ebola Virus Disease (EVD) was developed by the company. The production of the new drug will require more funding since short-term finance will not be sufficient. They believed it was time to introduce the drug into the market.

The directors of the company believed that launching the product would significantly increase the company’s share of the market because the country was anxiously looking forward to an effective EVD drug. Production and launch of this product is costly, and the company’s shareholders may not be able to raise such funds. This informed the directors’ decision to seek additional finance to be sourced partly in corporate bond and partly by the issue of shares.

They plan to issue the corporate bond in the first quarter of 2015 and the shares through an Initial Public Offer (IPO) towards the end of the year 2015. To decide on the appropriate method for the offer, the directors are interested in being educated on the issue.

Required:

(a) Compare and contrast the methods of issuing bonds through private placement and by public offer. State their advantages and advise on which method would be more appropriate in the above situation. (12 Marks)
(b) Advise the directors on the steps that need to be taken to improve the chances and success of its proposed Initial Public Offer (IPO). (4 Marks)
(c) Explain the three forms of Efficient Market Hypothesis (EMH), indicating which of them is most likely to apply in practice. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Bonds, EMH, Financing Strategy, IPO, Private placement, Public offer
Level: Level 3

Topic: Financing Decisions and Capital Markets
Series: NOV 2014

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

Question

The offer of shares of a company to a group of selected persons is called?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Equity, Private placement, Shares
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2012

FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt

Discuss the conflicts between management and shareholders, costs associated with appointing management, and calculate the yield and cost of different debt financing options for Gologo Ghana Ltd.

Question

a) Shareholders of a large company substantially delegate the management of their business to agents (managers). Decision-making authority is also delegated to management. In a perfect condition, Management is expected to give priority to the interest of shareholders rather than their personal interest.

Required:
i) In reference to the above, explain THREE (3) areas of conflict between Management and Shareholders. (6 marks)
ii) Explain TWO (2) aspects of cost to shareholders in appointing an agent (Management). (4 marks)

b) Gologo Ghana Ltd is making a choice between issuing a public bond and placing the debt privately for GH¢600 million.

The public offer will be in GH¢100,000 denominations and carry a coupon or interest payment of 25% per annum. The bond will, however, sell for GH¢96,000 each. The issuing and underwriting cost will be 5% of the market value and is tax deductible.

The private placement will attract an interest rate of 26% per annum, and the company will receive the full face value of the loan. In both cases, the debt will be repaid after 20 years. The tax rate for the company is 30%.

Required:
i) Calculate the annual yield (%) the buyers of the public bond will earn. (3 marks)
ii) Compute the cost of both the bond and the private debt. (7 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agency theory, Bond issuance, Cost of Debt, Private placement
Level: Level 2

Topic: Economic and regulatory environment, Sources of finance: debt
Series: JULY 2023

FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets

Compare bond issuance methods, steps for IPO success, and Efficient Market Hypothesis application.

Question

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Bonds, EMH, Financing Strategy, IPO, Private placement, Public offer
Level: Level 3

Topic: Financing Decisions and Capital Markets
Series: NOV 2014

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

Question

The offer of shares of a company to a group of selected persons is called?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Equity, Private placement, Shares
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2012

FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt

Discuss the conflicts between management and shareholders, costs associated with appointing management, and calculate the yield and cost of different debt financing options for Gologo Ghana Ltd.

Question

b) Gologo Ghana Ltd is making a choice between issuing a public bond and placing the debt privately for GH¢600 million.

Required:
i) Calculate the annual yield (%) the buyers of the public bond will earn. (3 marks)
ii) Compute the cost of both the bond and the private debt. (7 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agency theory, Bond issuance, Cost of Debt, Private placement
Level: Level 2

Topic: Economic and regulatory environment, Sources of finance: debt
Series: JULY 2023

Question Tag: Private placement

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets

Compare bond issuance methods, steps for IPO success, and Efficient Market Hypothesis application.

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt

Discuss the conflicts between management and shareholders, costs associated with appointing management, and calculate the yield and cost of different debt financing options for Gologo Ghana Ltd.

FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets

Compare bond issuance methods, steps for IPO success, and Efficient Market Hypothesis application.

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt

Discuss the conflicts between management and shareholders, costs associated with appointing management, and calculate the yield and cost of different debt financing options for Gologo Ghana Ltd.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Private placement

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets

Compare bond issuance methods, steps for IPO success, and Efficient Market Hypothesis application.

You're reporting an error for "FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets"

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

You're reporting an error for "FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting"

FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt

Discuss the conflicts between management and shareholders, costs associated with appointing management, and calculate the yield and cost of different debt financing options for Gologo Ghana Ltd.

You're reporting an error for "FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt"

FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets

Compare bond issuance methods, steps for IPO success, and Efficient Market Hypothesis application.

You're reporting an error for "FM – Nov 2014 – L3 – SB – Q4 – Financing Decisions and Capital Markets"

FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting

Define the offer of company shares to a select group of individuals.

You're reporting an error for "FA – Nov 2012 – L1 – SB – Q37 – Regulatory Environment of Accounting"

FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt

Discuss the conflicts between management and shareholders, costs associated with appointing management, and calculate the yield and cost of different debt financing options for Gologo Ghana Ltd.

You're reporting an error for "FM – July 2023 – L2 – Q1 – Economic and regulatory environment | Sources of finance: debt"

Our offerings

Contact Info

Customer

Get In Touch

admin