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When making a rights issue of:
1 for 4 we divide by 5
1 for 5 we divide by 6Can someone please explain why this is the case?
How I understood it is that, we issue 1 for every 4 we own i.e. if we own 4 we issue 1, if we own 8, we issue 2. Two answers have indicated otherwise.
Please help!
What you have written first is not the case at all !!
If it is 1 for 4, then for every 4 shares that currently exist we issue 1 new share.
If you have found questions that do differently, then it would seem that either you have misunderstood the question or there is a mistake in whatever book you are using.
I assume you have watched my free lectures on this?
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