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Company E decided to increase its share capital by capitalizing its reserves. To this end, the...

Company E decided to increase its share capital by capitalizing its reserves. To this end, the old shareholders will be given free 1 new common share in every 4 old shares. The market price of the common stock prior to the severance right is 20 euro. Calculate the price of the common share after the receipt has been cut.

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Answer #1

Market Price of Stock PRIOR ti new share issued = 20 Euros

Therefore, Market Price of 4 shares = 20*4 = 80 Euros

New Market Price AFTER issue = Prior Price of 4 shares/5 = 80/5 = 16 Euros per share

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