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See BPP exam kits , number 63 Tirwen Co (12/04).
see the answers for part (c) ; where does (the $2,500,000 of net issue costs) comes from ?There are currently 4M $0.50 shares in issue.
The rights issue is of 1/5 x 4M = 800,000 shares.The issue price is $4 less 15% = $3.40
So the total raised = 800,000 x $3.40 = $2.72M
There are issue costs of $220,000 to be paid out of the funds raised.
So the net amount raised is $2.72M – $0.22M = $2.5M
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