Steel Plus is a manufacturing company and is currently looking to build a new factory to cater for the demand for their product. Cost of building the new factory would require minimum MVR 9 million. The company is considering raising finance via 1 for 7 rights issue at 20% discount to the current market price of MVR 12 per share. Issue cost is estimated to be MVR 200,000 and will be paid from the proceeds of the rights issue. Steel plus currently have 7 million ordinary shares outstanding. Required (a) What is the RI (Rights Issue) price and What is the TERP (Theoretical Ex-Rights Price)? (b) How much is the value of the right and How many new shares will be issued? (c) How much new capital will be raised after taking into account the issue cost?
Steel Plus is a manufacturing company and is currently looking to build a new factory to cater for the demand for their product. Cost of building the new factory would require minimum MVR 9 million.
The company is considering raising finance via 1 for 7 rights issue at 20% discount to the current market price of MVR 12 per share. Issue cost is estimated to be MVR 200,000 and will be paid from the proceeds of the rights issue. Steel plus currently have 7 million ordinary shares outstanding.
Required
(a) What is the RI (Rights Issue) price and What is the TERP (Theoretical Ex-Rights Price)?
(b) How much is the value of the right and How many new shares will be issued?
(c) How much new capital will be raised after taking into account the issue cost?
Step by step
Solved in 4 steps
