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According to the standard, the calculation should be ((5m*$8+1.25m*$6)/6.25m-$6)/4 shares = $ 0.4 per share. I undersantand the “(5m*$8+1.25m*$6)/6.25m” part and I thought this is the answer, why should we minus $6 and divided by 4 shares continually?
The TERP is ((4 x $8) + 6)/5 = $7.60
Therefore the value of the right is 7.60 – 6 = $1.60 for each right.
It needs 4 shares to get one right, and therefore the value of the rights per existing share is 1.60 / 4 = $0.40.
I do explain all of this in my free lectures.
Aaa now I get it!! It need the value of a right! And yes this was taught in the free lectures, now I can remember it!! THANK YOU SO MUCH sir!!
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