Reference no: EM132949752

Access Enterprise Limited is a private company and has been in operation for over five years. The company was very profitable, however it was struggling to meet the high demand for its products. The company Directors called a strategic planning meeting to deal with the firm's inability to meet the overwhelming demand for its product and to consider options available to raise new capital. The Finance Director, Mr. Anthony Newman told the meeting that the firm was having working capital problems due to the fast space of growth the firm experienced since its inception. He further stated that new equipment and a large warehouse facility were needed to resolve the problem the firm was facing. The Finance Director told the meeting that the firm need to raise additional capital of $500m to put a dent in the unfulfilled demand from customers. The company was listed on the Jamaica Stock Exchange (JSE) and Five year later the company decided to diversify into another industry and require new capital of $250m. At the end of 2016 (the end of the firm accounting period) the firm equity capital was $15m and the par value of the shares was $0.40.

The market price for the shares for a five year period are as follows:

2012 =$1.20,

2013=$2.30,

2014= $3.70,

2015=$10.50 and

2016= $30.90.

There was a 2 for 4 right issue of shares at the end of 2016 and the price for the right issue was $2.50 per share. Having successfully expended and diversify the business, the firm accumulated surplus cash of $450m over a two year period. On February 1 2016 The Finance Director invested the surplus cash in fixed income investment in the following ratio: 5:4:6:5 where money market 5, treasury bills=4, corporate paper= 6 and CD=5.

• Money market fund interest rate was 9 percent per annum.
• Treasury bills interest rate was 5 percent per annum
• Corporate paper at 10 percent per annum
• Special CDs at 7 per cent per annum

On June 30, 2016 an investor purchase purchased nine million shares in the company when the market price of the share was $45.70 each.

Required:

Problem a. Advice the Directors of Access Business Enterprise Limited how the capital market can help the firm raised the $500m in new financing?

Problem b. What are the benefits to be obtain by the company having been listed on a Stock Exchange?

Problem c. Calculate the investment income on the fixed income instrument?

Problem d. Calculate the shareholding of the investor who purchase the large block of share on June 30, 2016 and list the benefits to be derived from such an acquisition?

Problem e. Analyze the capital gains and the growth in share price for the five year period. Prepare graphs to give a graphical view of the calculation.

Problem f. Calculate the number of shares to be issued from the rights issue and the amount of capital to be raised?

Problem g. Explain the following terms: corporate debts, government debts, equities and foreign exchange market? In each case give the characteristics and an example?