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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:
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)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
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:
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)
Find Related Questions by Tags, levels, etc.
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