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Share Capital:
Authorised capital: 100 million ordinary shares of $1 each $100,000Issued Capital :
60 million ordinary shares of $1each $60,000Reserves:
Share Premium $12,450
Revaluation Reserve $10,600
Retained Earnings $15,350The company is planning to make a bonus issue of 1:5 first, followed by a 1:4 right issue. Assuming the plan is getting through, how many new shares would be issued by the company after the two capital issues? Why does the company make the bonus issue first, followed by a right issue?
The bonus issue is of 1/5 x 60M = 12M shares.
So there are now 72M shares in issue.
The rights issue is of 1/4 x 72M = 18M shares.
So there are ow 72 + 18 = 90M shares in issue.
The question says that they make the bonus issue first. Why is not our problem – they can do it any way they want, but presumably they wanted to reduce the share premium account.
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Thanks for the prompt response sir. Really appreciate it. I have watched the lecture and i have clear understanding about it now. Thanks again.
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