Question

A company with 40 million shares in issue announces a 2 for 5 rights issue at...

A company with 40 million shares in issue announces a 2 for 5 rights issue at a price of GH¢6 per
share. The market price of the existing shares before the rights issue is GH¢7.40.
Required:
i. What is the theoretical ex-right price?
ii. What is the theoretical value of the rights?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The b3 Milk Company Limited is looking to expand and is contemplating a renounceable rights issue....
The b3 Milk Company Limited is looking to expand and is contemplating a renounceable rights issue. There are currently 2 million shares outstanding with a market value of $60 each. b3 Milk needs to raise $24 million and wants you to design a rights issue that will allow the new share price to be no lower than $55 and for there to be no more than 2.5 million shares outstanding after the issue. Calculate: a. how many shares must be...
QUESTION 23 Brother Ltd is proposing a 1 for 5 pro-rata renounceable rights issue. Presently there...
QUESTION 23 Brother Ltd is proposing a 1 for 5 pro-rata renounceable rights issue. Presently there are 250,000 shares outstanding at $45 each. In accordance with the rights issue there will be 50,000 new shares offered at $40 each. (a) How many shares must an existing shareholder own to obtain a right to a new share? (b) What is the theoretical ex-rights share price of Brother Ltd? (c) What is the value of a right in Brother Ltd? (d) If...
(a) ABC company has announced a rights offer to issue 2,000,000 new shares at a $11...
(a) ABC company has announced a rights offer to issue 2,000,000 new shares at a $11 subscription price. There are 5,000,000 shares outstanding trading at $12 each. Calculate the ex-rights price and the value of a right. (Show your calculations). (b) ABC company issued an annual coupon convertible bond with a coupon rate of 10% and a face value of $1,000. The bond will mature 2 years from today. The annual market interest rate is 10%. The conversion ratio is...
Cameo Co, which has an issued capital of 3 million shares, having a current market value...
Cameo Co, which has an issued capital of 3 million shares, having a current market value of £2.90 each, makes a rights issue of one new share for every two existing shares at a price of £2.30. What is the theoretical ex-rights price of the shares? A        £2.70 per share B        £3.47 per share C        £4.05 per share D        £4.15 per share
ABC Inc currently has 500,000 shares outstanding at $44 each. The company is proposing a rights...
ABC Inc currently has 500,000 shares outstanding at $44 each. The company is proposing a rights offering with subscription price set at $35. Shareholders will need to have four rights to exercise their right to buy each new share. I. What is the new market value of the company after the rights issue? II. What is the value of each right? What is the ex-rights price of shares? III. ABC managers want the ex-rights price to be $42.80. What should...
Question 5 (13 marks) (a) HSU has announced a rights offer to issue 2,000,000 new shares...
Question 5 (a) HSU has announced a rights offer to issue 2,000,000 new shares at a $11 subscription price. There are 5,000,000 shares outstanding trading at $12 each. Calculate the ex-rights price and the value of a right. (Show your calculations). (b) HSU issued an annual coupon convertible bond with a coupon rate of 10% and a face value of $1,000. The bond will mature 2 years from today. The annual market interest rate is 10%. The conversion ratio is...
A firm decides to raise $1 million with a rights issue. Each existing shareholder purchases one...
A firm decides to raise $1 million with a rights issue. Each existing shareholder purchases one new share for each four that they currently hold, with 50,000 shares to be issued. The issue will be based on a subscription price of $20. Assuming that the current share market price is $35, calculate the ex-rights price of the company stock.
Klevin Co is considering an extensive rights issue to raise new finance. It currently has 4...
Klevin Co is considering an extensive rights issue to raise new finance. It currently has 4 million shares and has been very successful over a prolonged period. The term of the deal are as follows: -          One new share for every 4 held at a price of 90% of the existing market value per share. -          The existing market value is 20 € per share (the with rights price). One of the directors is unhappy with offering any discounts to existing shareholders....
(a) HSU has announced a rights offer to issue 2,000,000 new shares at a $11 subscription...
(a) HSU has announced a rights offer to issue 2,000,000 new shares at a $11 subscription price. There are 5,000,000 shares outstanding trading at $12 each. Calculate the ex-rights price and the value of a right. (Show your calculations). (b) HSU issued an annual coupon convertible bond with a coupon rate of 10% and a face value of $1,000. The bond will mature 2 years from today. The annual market interest rate is 10%. The conversion ratio is 40 shares....
Scotch Spirit currently has 60 million shares of stock outstanding at a price of $40 per...
Scotch Spirit currently has 60 million shares of stock outstanding at a price of $40 per share. The company would like to raise money and has announced a rights issue. Every existing shareholder will be sent one right per share of stock that he or she owns. They plan to require 3 rights and $30 to purchase one new share. Assuming the rights issue is fully subscribed, how much money will it raise? What will the share price be after...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT