Question
8. Guinness Ghana Ltd. makes a rights issue at a subscription price of GHS5 a share. One new share can be purchased for every five
8. Guinness Ghana Ltd. makes a rights issue at a subscription price of GHS5 a share. One new share can be purchased for every five shares held. Before the issue there were 10 million shares outstanding, and the share price was GHS6. a) What is the total amount of new money raised? b) What is the expected stock price after the rights are issued? c) By what percentage would the total value of the company need to fall before shareholders would be unwilling to take up their rights? d) Suppose that you initially own 100 shares plus GHS100 in the bank. If you take up your rights issue, what will be your total wealth after the issue is completed?
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