He.1. A business has issued ordinary shares 30 million $0.10 shares. On June 10 the Stock Exchange closing price of the shareswas $1.50. Early on the morning of June 11, the business publicly announced that it had just secured a new contract tobuild some hotels in the Middle East. The new contract requires an initial investment of $10 million and is expected togenerate the following cash flows over the next 5 years:Year1DUAWNH2345CF2.003.005.005.606.64On 12 June, the business announced its intention to raise the necessary money to finance the work, through a rights issuepriced at $1.00 per share.Required:A. Calculate the net present value of the new contract. Assume a required rate of return of 10%.determine the theoretical value of the right to buy one new share assume that the events described above were the onlyinfluence on the share price

To calculate the net present value (NPV) of the new contract, we need to discount the cash flows at…

A business has issued ordinary shares 30 million $0.10 shares. On June 10 the Stock Exchange closing price of the shares was $1.50. Early on the morning of June 11, the business publicly announced that it had just secured a new contract to build some hotels in the Middle East. The new contract requires an initial investment of $10 million and is expected to generate the following cash flows over the next 5 years: Year 1 2 3 4 5 CF 2.00 3.00 5.00 5.60 6.64 On 12 June, the business announced its intention to raise the necessary money to finance the work, through a rights issue priced at $1.00 per share. Required: A. Calculate the net present value of the new contract. Assume a required rate of return of 10%. determine the theoretical value of the right to buy one new share assume that the events described above were the only influence on the share price

A business has issued ordinary shares 30 million $0.10 shares. On June 10 the Stock Exchange closing price of the shares was $1.50. Early on the morning of June 11, the business publicly announced that it had just secured a new contract to build some hotels in the Middle East. The new contract requires an initial investment of $10 million and is expected to generate the following cash flows over the next 5 years: Year 1 2 3 4 5 CF 2.00 3.00 5.00 5.60 6.64 On 12 June, the business announced its intention to raise the necessary money to finance the work, through a rights issue priced at $1.00 per share. Required: A. Calculate the net present value of the new contract. Assume a required rate of return of 10%. determine the theoretical value of the right to buy one new share assume that the events described above were the only influence on the share price

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 20P

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