Question
Company A carries out a Share Capital Increase with cash payment. The terms of the Share Capital Increase are as follows: For every T old
Company A carries out a Share Capital Increase with cash payment. The terms of the Share Capital Increase are as follows: For every T old shares, T1 new shares are issued with a sale price 1. Before the Share Capital Increase, the share price is P0. 1) For company A, calculate the adjusted price P* of its share after the Share Capital Increase and the price of the preference rights of the old shareholders. 2) A former shareholder of company A, who does not have money to participate in the Share Capital Increase, sells the preference rights he has at the price of the previous question. Show that the sale of the options fully compensates the investor for the price change from P0 to P*.
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