Forum Replies Created
- AuthorPosts
- May 3, 2016 at 7:46 pm #313576
Thank you very much 🙂
June 11, 2015 at 12:44 pm #256351Mr. John Moffat
Would you kindly give any opinoin about my answer? I am eagerly seeking for your comments….. sir
June 10, 2015 at 5:21 pm #256115yeah…….. with some mistakes for sure……. 😀
June 10, 2015 at 4:55 pm #256107yes……. i am also thinking so now..
June 10, 2015 at 4:42 pm #256101Dear Mr. John Moffat
I have also tried to solve in a different way. Before rights issue no. of shares were 20 million…. which increased to 24million. (1 for 5 rights issue.)P/E ratio before rights issue were 8.33 (current market value of $3.5 per share / EPS of $0.42 per share). After rights issue I asuumed the total earnings will remain unchanged i.e.$ 8400,000.(as this is the current earnings and we are determining the immediate effect). So the revised EPS is $0.35 per share ($8400,000/24 million). As the market price of the share is EPS * P/E ratio and the P/E ratio is unchanged so revised market price is $2.96 per share(0.35 * 8.33). Comparing this with the theoretical ex- rights price of $3.38 per share ((5 * 3.5 + 1 * 2.8)/6) this is a net capital loss of $0.42 per share (3.38 – 2.96) .Dear Sir…..
what do you think about my answer 🙂June 8, 2015 at 10:46 am #255047yes…. this was in the exam and i am uncertain about this too.
- AuthorPosts