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Hi sir, for the following question below how do work out the question when the amount of dividends due is not given ? So i cannot find the ex div share price.
Qn: Compton plc has announced a 1 for 4 rights issue at subscription price of $2.50. The current cum-rights price of the shares is $4.10
What is the new ex-div market value of the shares?
Answer: $3.78
There is not enough information to be able to answer the question!
If it is from the BPP Revision Kit then tell me which number the question is.
Otherwise I cannot help more.
No sir. This is all. I already typed the entire question here. This question is from my ACCA approved exam kit from Kaplan.
The workings is as shown below, but i still don’t understand.
New ex-div market value per share
= (4 x $4.10+$2.50) /5
= $3.78Oops – I was thinking you had written that the cum div price was $4.10. Sorry!
In fact it is the cum rights price, and we assume as always (unless told differently that it is ex div) and therefore the Kaplan answer is correct.
Sorry about that 🙁
Just to point out the obvious in case anyone else miss-reads the original statement like I and John did (and I missed it again even when reading this thread).
The question says “cum-rights” it does NOT say “cum-div”
So the share price given is with the rights to the share issue
It doesn’t include anything to do with dividends so we assume that we can exclude dividends in the question.
Note: Read the question properly!
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