Question

You are the fund manager of a XYZ Fund Limited. The fund has a cash of GH¢ 2.3 million and financial securities of GH¢ 21.9 million. Liabilities are GH¢ 16.9 million. Total issued shares outstanding are 12.7 million. Compute the net asset value of the mutual fund b) Generally, the price of a share of a mutual fund is its net asset value per share. Compute the net asset value per share. c) If the fund sells 500,000 more shares at the price you calculated in (b). How much extra cash was raised from the sale of the additional shares? d) Using the information in (c), calculate the new net asset value per share.

Answer 1

Solution:

a) Net asset value of the mutual fund

Net asset value = Assets - Liabilities = Cash value + Value of financial securities - value of liabilities = 2.3 million + 21.9 million - 16.9 million = GH¢ 7.3 million Net asset value of the mutual fund = GH¢ 7.3 million

b) Net asset value per share

Net asset value per share = Net asset value/Total issued shares outstanding = 7.3 million/12.7 million = GH¢ 0.57480315

Net asset value per share = GH¢ 0.57 (rounded to two decimal places)

c) Extra cash raised from the sale of additional shares

Extra cash raised from the sale of 500,000 shares @ GH¢ 0.57480315 = 500000 x 0.57480315 = GH¢ 287,401.575

Extra cash raised from the sale of additional shares = GH¢ 287,401.57 (rounded to two decimal places)

d) New net asset value per share

New net asset value = Extra cash raised value + Earlier net asset value = 287401.575 + 7.3 million = 287401.575 + 7300000 = GH¢ 7,587,401.575

New shares outstanding = Earlier shares outstanding + New shares issued = 12.7 million + 500,000 = 12700000 + 500000 = 13,200,000

New net asset value per share = New net asset value/New shares outstanding = 7587401.575/13200000 = GH¢ 0.57480315

New Net asset value per share = GH¢ 0.57 (rounded to two decimal places)

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