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Hi mike
Alfred has correctly calculated the EPs of the current year but isk confused about how to restated last year EPs.On 31/3/201$ there had been a 2 for 5 right issue with an exercise price of 1.25. Mid market price before the issue was $3.corpora the tax rate 30%.
By what fraction should last year EPs be multiplied?Calculate the rights fraction as I have shown in the notes. Then turn it upside down
Have you read the course notes? They are free on this site!
You did have 5 shares worth $3 each = $15
You now have 2 more cost $1.25 each = $2.50
So now you have 7 cost $17.50
That’s a theoretical ex-rights price of $2.50 each and a cum-rights price of $3
So the rights fraction is 3/2.5 and the reciprocal is therefore 2.5/3 and that’s the same as 5/6
Read the notes!
ok thanks, I do understand now. im just confused some questions the number of share is used to find the restated eps, some the the formula you used.
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