1) Sunshine Insurance has quoted you the annual premium to insure your car of= $3120. You are offered a= 15% discount if you pay lump sum immediately. They also offer the alternative payment method. You can pay account in full by making 12 equal end of month payments of= $260, rather than lump sum. Determine the effective annual opportunity cost of paying monthly? You should give one complete manual computation of IRR to show that you understand process.
2) Moonstar Ltd needs to increase extra capital. Company is considering the renounceable rights issue to increase $2 million. There are presently 1,200,000 shares on issue, trading at= $12. From rights issue company plans to raise total number of shares on issue to 1,500,000.
i) Compute the theoretical ex rights price.
ii) Compute the value of the right to one share (using Australian definition of a right).
iii) How much better off/worse off is the owner of one right if he/she doesn’t sell or exercise right? Describe your logic/working giving a full description.
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