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sir why in this they minus issue cost while calculatng TERP should be minus or add for calculatng market value
Alternatively, issue costs are $0·07 per share (280,000/4m) and this is a 1 for 5 rights issue, so the theoretical ex rights
price = (5 x 3·50 + (2·80 – 0·07))/6 = 20·23/6 = $3·37 per share)There is are lectures on here in which I work through the whole of the June 2015 exam.
This should answer your question 🙂Here is the link:
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