Answer:
A.$500,000
B. $2 Right
C.$0.33
Explanation:
A.The amount that the company wants to raise ÷The subscription price = Shares Issued
Amount raise
$2,000,000
Subscription price $4
Hence:
$2,000,000÷$4
=$500,000
Therefore $500,000 is the shares to be issued out by the company
B.
Rights that it will take to purchase one share.
1,000,000/500,000 = 2 rights
C. The Investors have 2 shares
The MV of the portfolio before the rights was issued= 2x$5 = $10
The MV of portfolio after the rights was issued =
$10+$4= $14
The price per share :
$14/3
=$4.67
The value of rights :
$5-$4.67
= $0.33
Answer: 0.33
Explanation:
Funds Required. = 2,000,000
Subscription Price = 4.00
Total New Shares =2000000/4 = 500,000
Current no of shares outstanding = 1,000,000
Right ratio =500000/1000000 = 0.5
Therefore, per share 0.5 right would be issued and 2 rights will be required to buy 1 share
Share price after right issue will be:
=(Share price before rights + the subscription price per share)/Total number of shares
= ((1000000 × 5)+(500000 ×4) ÷ (1000000+500000)
= 4.67
Value of right = 5 - 4.67
= 0.33
