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existing share price

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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May 7, 2018 at 5:21 pm #450487
stepstothebest
- Topics: 62
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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: 50602
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
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