You are the Chief Financial Officer of Hilton Ltd, a large manufacturing company operating within the...

80.2K

Verified Solution

Question

Accounting

You are the Chief Financial Officer of Hilton Ltd, a largemanufacturing company operating within the Asian-pacific region.The CEO, Mr Ray Ellis, has just returned from a shareholdersengagement event to promote the company’s upcoming right issue ofshares. He was confronted with some questions relating to issue ofshares and whether there were any pros and cons to issuing sharesvia rights, bonus or by private placement. Issues related to thecompany’s earnings per share (EPS) also came up during the event.Mr Ellis was unimpressed with both the questions and his inabilityto respond in a comprehensive manner. He promised the shareholdersthat he would email them with clear responses to the issues raised,after he consulted with his Chief Financial Officer.
In consulting you, Mr Ellis would like to know your thoughts on thefollowing:
? What is the difference between rights issue and bonus issue ofshares?
? What are the advantages and disadvantages of both methods ofissuing shares?
? Should Hilton Ltd consider a private placement and is there anybenefit to having a private placement instead of a rightsissue?
? What effects does a bonus issue of shares made in the middle of afinancial year have on the EPS calculations of a company?
Required
Write a short memorandum format report to the CEO of Hilton Ltd toanswer his questions. Your report should cover all four questionsraised by Mr Ellis. Each question should be answered under asub-heading within the report with appropriately citedreferences.

Answer & Explanation Solved by verified expert

4.2 Ratings (740 Votes)

CHIEF EXECUTIVE MEMO To Mr Ray Ellis CEO Hilton Ltd From XYZ CFO Date 23092018 Re Answer to the questions Enclosed please find the response to the questions relating to issue of shares and whether there were any pros and cons to issuing shares via rights bonus or by private placement SubHeading are used for all those questions and are as follows 1 Rights Issue vs Bonus Issue Rights issue are the shares issued to the existing shareholders ie they have a priority over issue of new shares These new shares before being offered to the market are issued to the existing shareholders at discounted price for a specified period than the price to be offered in the general market Right shares are mandatory for the companies These shares can be fully or partly See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

You are the Chief Financial Officer of Hilton Ltd, a largemanufacturing company operating within the Asian-pacific region.The CEO, Mr Ray Ellis, has just returned from a shareholdersengagement event to promote the company’s upcoming right issue ofshares. He was confronted with some questions relating to issue ofshares and whether there were any pros and cons to issuing sharesvia rights, bonus or by private placement. Issues related to thecompany’s earnings per share (EPS) also came up during the event.Mr Ellis was unimpressed with both the questions and his inabilityto respond in a comprehensive manner. He promised the shareholdersthat he would email them with clear responses to the issues raised,after he consulted with his Chief Financial Officer.In consulting you, Mr Ellis would like to know your thoughts on thefollowing:? What is the difference between rights issue and bonus issue ofshares?? What are the advantages and disadvantages of both methods ofissuing shares?? Should Hilton Ltd consider a private placement and is there anybenefit to having a private placement instead of a rightsissue?? What effects does a bonus issue of shares made in the middle of afinancial year have on the EPS calculations of a company?RequiredWrite a short memorandum format report to the CEO of Hilton Ltd toanswer his questions. Your report should cover all four questionsraised by Mr Ellis. Each question should be answered under asub-heading within the report with appropriately citedreferences.