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The question is as follows:
A company is investing $70 million in a new project and will be funding part of the investment by debt and the remainder by equity through a rights issue.
The current share price is $4 and the market capitalization is $200million.
The rights issue price will be at a discount of 20% to the current share price.
The rights issue will be on a 1 for 5 basis. The issue costs are expected to be $2million. The current equity gearing is 40% (debt:equity)
What is the revised Equity gearing of the company?A. 40%
B. 42.9%
C. 40.7%
D.415%I got this question from my friend, I wish to obtain a solution.
Thank YouHi
I would have if she had the solution. I would be grateful if you could help me solve this .
Thank you
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