Pine Company Ltd. is planning to market a new product, Pinew. To finance the venture, it...

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Pine Company Ltd. is planning to market a new product, Pinew. To finance the venture, it proposes to have a rights issue at S

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Answer 1

Answer #1

answer (i)

market capitalization of company =( shares outstanding x price per share )+ (rights issued x price of rights issue)

= (2,000,000 x 150) + (1,000,000 x 40 )

= 300,000,000 + 40,000,000

=340,000,000

new total number of shares outstanding = shares outstanding + rights issued

= 2,000,000 + 1,000,000

=3,000,000

New share price = marekt cap / new total shares outstanding

=340,000,000/3,000,000

=shs 113.33

answer (ii) value of right to buy one share = share price - new share price

= 150 - 113.33

= 36.67 shs

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Answer 2

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