Question
Associate breweries is planning to market alcohol free beer. to finance the venture it proposes to make a rights issue at $10 of one new
Associate breweries is planning to market alcohol free beer. to finance the venture it proposes to make a rights issue at $10 of one new share for each two shares held. the company currently has outstanding 100,000 shares priced at $40 per share. Assuming that the new money is invested to earn a fair return, give values for the following:
a) Number of new shares
b) Amount of new investment
c) Total value of company after issue
d) Total value of company before issue
e) Stock price after the issue
f) The rights issue will give the shareholder the opportunity to buy one new share for less than market price. What is the value of this opportunity?
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