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hi sir, I would like to ask few questions regarding to value of a right.
I have few confusions about this.
1) What is actually value of a right? Based on my understanding, it is some kind like a profit. Is it?
2) what is value of a right per existing shares? I cannot seem to understand this very well. hope you can help.
thank you sir 🙂
A right is the right to purchase a share at a price lower than the current market value and is given to existing shareholders. If the shareholder does not want to purchase the new share then they can sell the right to purchase at the lower price. The amount they can sell the right for is the value of the right.
This is all explained in my free lectures on Sources of Finance – Equity. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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