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Could you please explain the calculation for this question below
ABC Ltd. has decided to raise capital via a rights issue.
The share price is currently $5.50 and ABC intends to raise $5m.
There are currently 6.25m shares in issue and ABC is offering a 1 for 5 rights issue.
Calculate the Theoretical Ex-Rights Price.They will be issuing 6.25M / 5 = 1.25M shares.
So the issue price will be $5M/1.25M = $4 per share.So the TERP will be ((5 x $5.50) + $4) / 6 = $5.25 per share.
The free lectures will help with your understanding of this.
Please help me with this questions..
A company wishes to raise Rs 3000000 through a right offerings.It has 240000 shares outstanding which has been most recently trading between Rs106 and 116 per share. On the advice of SBI caps the company has set the subscription price for the rights at Rs 100 per share.
What will be the theoretical value of a right if the current market price is Rs109 with rights and the subscription price is Rs100?We do not provide answers to test questions!
Unless it is a test question, you must have an answer in the same book in which you found the question, so you should ask about whatever it is in the answer that you are not clear about.
My free lectures on this explain in detail how to do the calculation, with examples (and, of course, the workings are exactly the same (with different numbers) as the workings for the previous question in this thread!)
The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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