APC Financial Management Assessment 2019

APC Financial
Management Assessment
2019

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Question 2. Long term finance. ..................................................................................................1
Question 3...................................................................................................................................5
b. Critical evaluation of investment appraisal techniques with the help of its benefits &
drawbacks..................................................................................................................................10
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial management is one of the key aspect of all kinds of business entities. This is so
because in the absence of proper management of financial resources, it can be difficult for
companies to make proper utilisation (Finke, 2013). In other words, the term financial
management can be defined as a process of planning, managing and controlling different
financial activities by help of various types of activities such as ratio analysis, investment
appraisal techniques etc. The project report is based on two various task which are related to long
term finance and investment appraisal techniques.
MAIN BODY
Question 2. Long term finance.
(a) Issue of Right share- The issue of right share can be defined as a process of inviting existing
shareholders to make purchase of additional new shares in company. This kinds of issue
provides securities to existing shareholders which is known as rights (Schmidgall and
DeFranco, 2016). By help of this right, shareholders can buy new shares at a discount to
market price on a fixed future date. Such as in the aspect of above Love-well limited
company, this can be find out they want to issue right shares among existing shareholders
with an objective of completing financial needs. In regards to right issue, herein underneath
some calculations are done that are as follows:
Lexbel plc wishes to rise: 180000 Pounds
Current ex-dividend market-price of Lexbel plc: 1.90 Pounds
3 assorted rights-issue prices recommended by corporation's finance director: GBP1.80, GBP
1.60 and GBP1.40
Right issue of Lexbel plc
Aggregate (no.)Ordinary shares (@ 50 for
each) 300000 Pounds
Add: Aggregate Reserve 400000 Pounds
Whole Sum 700000 Pounds
1

Profit Post taxation ( 700000 pounds x 20
percent) 140000 Pounds
(I) Number of shares to be issued = (Aggregate Funds to be elevated / right issue prices)
Descriptions
Amount (in
pound except
shares)
Amount (in
pound except
shares)
Amount (in pound
except shares)
Exist number of share 600000 600000 600000
Fund to be raised (A) 180000 180000 180000
Suggested right issue prices (B) 1.80 1.60 1.40
Number of shares to be issued (A/B) 100000 112500 128571.43
(ii) Theoretical ex price: This is also known as TERP. It can be defined as a kinds of situation in
which stock and right attached to stock. The value of theoretical ex price is being calculated by
price for a business entity’s stock shares after issuing new right shares along with the assumption
which all new issued shares are considered by existing shareholders (Guastello, 2014). Basically,
the aim of this kinds of share is to produce additional capital with existing shareholders by giving
them priority. Offers of security rights can be common for investors. It is so because they can
produce arbitration by time of right offered.
Particular Condition one Condition two Condition third
Recommended right issue prices 1.8pound 1.6pound 1.4pound
Fund to be raised 180000 pounds 180000 pounds 180000 pounds
Number of shares needed to issue 1 lac shares 1.125 lac shares
128571.43share
s
Pre right issue 1140000 1140000 1140000
2