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Hello Tutor,I have two question from these two past years paper.
June 2013 Q4(b):
“raising $3·2 million after issue costs of $100,000 by issuing new shares
to new shareholders at a price of $2·50 per share”
A:The cash to be raised = 3,200,000 + 100,000 = $3,300,000I don’t really understand the wording, which does the $3.2m raised have included issue cost or excluded?
June 2008 Q2(b):
“Theoretical ex rights price = [(3 x 4·80) + 3·84]/4 = $4·56 per share”Can I deduct the issue cost of $0.32 from above and get $4.48 per share which will be the same answer for the market capitalization, but I don’t know is it correct?
Thank you.
First question:
Because they need $3.2M after issue costs, they need to raise more that $3.2M so as to cover the issue costs and be left with the amount that they need for the investment. Since the issue costs are $100,000, then need therefore to raise a total of $3.3M.
Second question:
It is correct, because the issue costs are $320,000 and there are 1M shares, so $0.32 per share.
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