QUESTION 1 Kaduna Textile Mills Plc (KTM) is a publicly quoted manufacturing company on the Nigerian Exchange Group (NGX). The Board of Directors is considering expanding its production capacity by establishing a new plant in Kano at an estimated cost of N850 million. The Finance Director has shortlisted the following three financing options for consideration at the next Board meeting: (i) A Rights Issue at N4.50 per share (current market price is N6.00) on a 1-for-3 basis. KTM currently has 200 million ordinary shares in issue. (ii) A seven-year term loan from First Bank of Nigeria Plc at an interest rate of 18% per annum, with the principal repayable in equal annual instalments. (iii) A Eurobond issue of USD 500,000 at a coupon rate of 7% per annum (assume exchange rate: N1,500/USD1). Required: (a) Calculate the total funds that would be raised from the Rights Issue and determine whether it is sufficient to finance the new plant. (6 marks) (b) Explain FOUR advantages and TWO disadvantages of using a term loan as a source of finance for KTM. (6 marks) (c) Discuss THREE risks associated with issuing a Eurobond as a source of finance for a Nigerian company like KTM. (6 marks) (d) Advise the Board on which financing option is most appropriate for KTM, stating TWO reasons for your recommendation. (2 marks) Total: 20 marks