Question 2

(a) PH Bhd wants to raise RM10 million in new equity through rights offering. Currently its

share price is RM5 per share and the corporation has 2 million share outstanding. The

subscription price is RM2.50.

(i) How many new shares Super Tech Bhd must issue?

(ii) Assuming you own 10,000 ordinary shares in PH Bhd. If you receive the rights

offering, how many of the new shares can you purchase?

(iii) What is the share price after the rights offering?

(iv) What is the value of one right?

(v) Calculate your total investment in PH Bhd after the rights offering. Demonstrate

the effect on the economic wellbeing of your investment before and after the

rights offering.

(b) Contrast and explain THREE (3) distinguishing characteristics between stocks and

bonds.