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Financing – Equity finance
Example 3
A company, whose shares currently sell at $75 each, plans to make a rights
issue of one share at $60 for every four existing shares.
What is the theoretical ex-rights price of the shares after the issue?
A $75.00
B $72.00
C $67.50
D $63.00
Solution
The answer is (B).
[(4 × $75) + $60]/5 = $72
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