
EBK PERSONAL FINANCE
8th Edition
ISBN: 8220106777794
Author: KEOWN
Publisher: PEARSON
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Chapter 12, Problem 1DC2
Summary Introduction
To determine:
Number of shares owned by P and J after two-for-one split, market value of the stock after two-for-one split, effect of split on the value of their holdings and stock split makes stocks a real money maker.
Introduction:
Stock Split is the breakdown of shares of a company which increases the number of shares available to trade in market without affecting the market value or market capitalization of company.
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The Company’s Act 71 of 2008 has crucial regulations that relate to the auditing of financial statements of the companies. These regulations are regulation: 26, 27, 28, 29 and 43. These regulations work in conjunction with each other and are pertinent to the public interest score concept, audit and review requirements, reportable irregularities for independent reviews, the financial reporting standards with which different entities must comply as well as the social and ethics committee. The following relevant details pertain to Harakuta (Pty) Ltd:
Employees at 31 January 2023
210
Employees at 31 December 2023
250
Long-term loan: FNB bank
N$30.3 million
Turnover for the year to 31 December 2023
N$60 million
Number of shareholders as at 31 December 2023
33
Required:a. Calculate the public interest score of Harakuta (Pty) Ltd for 2023 financial year b. With a reason of your above calculation indicate if Harakuta (Pty) Ltd requires to be audited or not.
provide a detail explanation on how to complete the table given below
compute the WACC from the information provided after the table template.
capital component
market value
weight
cost of capital
weight x cost of capital
debt
common stock
preferred shares
The following balance sheet extract relates to the Spread-Out AirlinesLtd.Bonds Payable $1,000,000Preferred Stock $2,000,000Common Stock $3,000,000
Additional Information:1. The bonds are 8%, annual coupon bonds, with 9 years tomaturity and are currently selling for 90% of par.2. The company’s common shares which have a book value of $25per share are currently selling at $20 per share.3. The preferred shares are 5% preferred shares with a bookvalue of $100 per share. These shares are currentlyselling at $80 per share.4. The company has an equity beta of 1.35 and the current Treasury bill rate is 3.0%. The market risk premium is1.5%5. The company’s tax rate is 30%.
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