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existing share price

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › existing share price

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 7, 2018 at 5:21 pm #450487
    stepstothebest
    Member
    • Topics: 62
    • Replies: 15
    • ☆☆

    TOYOTA Co announces a 2 for 5 rights issue at $2 per share. There are currently 10 million shares in issue, and the current market price of the share is $2.70.

    TERP ………..$2.5 per share
    issue ………….($2)
    value of right $0.5

    0.5/5 is $0.1 per existing share is my answer.

    but,

    in the answer sheet,

    $0.5/5 * 2 = $0.2 per existing share.

    I have no idea the reason they multiply 2 on this formula.

    what did I miss? Sir

    have nice dinner sir

    May 8, 2018 at 5:55 am #450532
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54705
    • ☆☆☆☆☆

    They get 2 rights for every 5 shares.

    Therefore for every 5 shares they get rights worth 2 x $0.5 = $1.0

    Therefore for every existing share it is $1.0 / 5 = $0.2

  • Author
    Posts
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