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FIN4801 Assignment 04 2022 Answers R65,00
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FIN4801 Assignment 04 2022 Answers

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  • August 11, 2022
  • 7
  • 2022/2023
  • Exam (elaborations)
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FIN4801
ASSIGNMENT 04


QUESTION 1
A company has resolved to list on the JSE. If the company wishes to raise equity of at least R1
billion and feedback from its roadshow (and prospectus, sponsor and bankers) has valued its
shares at R20 apiece (intrinsic value), how many shares would the company have to issue if
under-pricing is expected to be 20%?
(Assume the company can issue any number of shares)



A. 2 500 000 shares
B. 125 000 000 shares
C. 200 000 000 shares
D. 1000 000 000 shares


Fair Value of one share as estimated by bankers = R20

Company takes under-pricing into account = 20%

Therefore,

Actual Fair Value of Share = R20 / (100% - 20%) = R25

Capital required to be raised = R1 billion

Number of shares to be issued = R1,000,000,000 / R25 = 40 million shares

The company would have to issue 40 million shares to raise R1billion.

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