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Finance Question
The ordinary share price of Arrow Tech is currently at $3.00. To finance an expansion, the company intends to raise $20 million through a one-for-three rights issue priced at $2.00. Mr Lim would like to understand more about this rights issue.
(a) What is the theoretical ex-right price? (b) How many ordinary shares were in circulation prior to the right issue? (c) Mr Lim owns 9,000 shares and is unable to find the cash necessary to buy the rights shares. Reassure Mr Lim why he will not lose value. What is the value of a right on one old share? How much might he receive from the company? |
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