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urgent - practice exam question

1) XYZ plc Company is hoping to raise £4.50m

2) Current share price is standing at £4.00

3) Number of shares already issued 5m

4) Discount level expected 33%


The question is what form of rights issue should XYZ plc take?

anyone got an answer to this, will be highly appreciated (with workings).
Reply 1
Avatar for Axion
Axion
15
No idea what this subject is for but I'll do it for you.

33% discount therefore they are hoping to raise cash at a share price at circa £2.64 a share.

£4.5m divided by £2.64 = 1.704m shares need to be placed.

Therefore new total shares in company = 6.7m

Don't know what your actual question is, but is that useful?
Original post by Axion
No idea what this subject is for but I'll do it for you.

33% discount therefore they are hoping to raise cash at a share price at circa £2.64 a share.

£4.5m divided by £2.64 = 1.704m shares need to be placed.

Therefore new total shares in company = 6.7m

Don't know what your actual question is, but is that useful?


ah cool, its financial management / corporate finance question - im a final year accounting student by the way. im pretty sure you've got the it right untill 6.7m - but then you must simplify by something along the lines of: for every 5 shares (5m shares in issue) you will have the right to obtain 1 share at a discount - but im not sure the ratio side
Reply 3
Avatar for Axion
Axion
15
Original post by Larissa White
ah cool, its financial management / corporate finance question - im a final year accounting student by the way. im pretty sure you've got the it right untill 6.7m - but then you must simplify by something along the lines of: for every 5 shares (5m shares in issue) you will have the right to obtain 1 share at a discount - but im not sure the ratio side


Hmm ok, maybe 5m divided by 1.7m = 2.94

Not sure whtehr you round up or down, but maybe each holder has the right to 2/3 new shares per share they currently own?

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