If a company has 2240 million shares outstanding and each share is worth AUD 3.60 the market capitalization (value of the company) is million AUD. The company seeks to raise AUD 728 million by selling new shares with a subscription price of AUD 2.60, therefore it has to issue million new shares. After issuing these new shares successfully its new market capitalization will be million AUD and the total amount of shares will grow to million. As a result the value of each share after the issue will be AUD. The difference between the subscription price and the share price after the issue is AUD. Therefore, it is worth to pay up to AUD for the RIGHT to buy shares at AUD 2.60. Compare the old share price with the share price after the issue. It dropped by AUD. The ratio of the number of old shares to newly issued shares is exactly This is also the number of old shares you need to get ONE RIGHT for a new share. HINT: Check if

If a company has 2240 million shares outstanding and each share is worth AUD 3.60 the market capitalization (value of the company) is million AUD. The company seeks to raise AUD 728 million by selling new shares with a subscription price of AUD 2.60, therefore it has to issue million new shares. After issuing these new shares successfully its new market capitalization will be million AUD and the total amount of shares will grow to million. As a result the value of each share after the issue will be AUD. The difference between the subscription price and the share price after the issue is AUD. Therefore, it is worth to pay up to AUD for the RIGHT to buy shares at AUD 2.60. Compare the old share price with the share price after the issue. It dropped by AUD. The ratio of the number of old shares to newly issued shares is exactly This is also the number of old shares you need to get ONE RIGHT for a new share. HINT: Check if

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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