《ACCA考试之财务管理 FINANCIAL MANAGEMENT》课件PPT 12 Source of finance.ppt

* * b * b * b * b * b * b * Theoretical ex-rights price and the value of rights Since rights have a value, they can be sold in the period between: The rights issue being announced and the rights to existing shareholders being issued, and The new issue actually taking place 4.9 The market price of shares after a right issue: the theoretical ex-right price * The theoretical gain or loss to shareholders Take up or exercise their rights Renounce their rights and sell them on the market Renounce part of their rights and take up the remainder Do nothing 4.9 The market price of shares after a right issue: the theoretical ex-right price * The actual market price of a share after a right issue may differ from the theoretical ex right price. This will occur when expected yield from new funds unequal earnings yield from existing funds The market will take a view of how profitably the new funds will be invested, and will value the shares accordingly. 4.10The actual market price after a right issue * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 2.7 Convertible loan notes The actual market price of convertible loan note will depend on The price of straight debt (debt can’t be converted for another asset) The current conversion value The length of time before conversion may take place The market’s expectation as to future equity returns and the risk associated with these returns * 2.7 Convertible loan notes The actual market price of convertible loan note will depend on The convertible bond may be viewed as straight debt plus an option to purchase common stock in the corporation. Both the value of the debt and the value of the option components are affected by the volatility of the company’s cash flows. The greater this volatility, the lower the value of the debt component but the higher the value of the option component. * 2.8 Security Loan notes and debentures will often be secured. Security may take the form of either a fixed charge or a floating charge. No