Brag plc is raising finance through a rights issue and the current ex dividend market price of

Question:

Brag plc is raising finance through a rights issue and the current ex market price of its shares is £3.00. The rights issue is on a 1 for 6 basis and the new shares will be offered at a 20 per cent discount to the current market price.
(a) Discuss the relative merits of the following ways of raising new equity finance:
(i) A placing;
(ii) A public offer.
(b) Explain why, in general, rights issues are priced at a discount to the prevailing market price of the share.
(c) Calculate the theoretical ex-rights share price of Brag plc and the value of the rights per share using the above information.
(d) Discuss the factors that determine whether the actual ex-rights share price is the same as the theoretical ex-rights price.
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...