Anold has issued 3,000,000 ordinary shares of $1 each, which are at present selling for $4...

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Anold has issued 3,000,000 ordinary shares of $1 each, which are at present selling for $4 per share. The company plans to issue rights to purchase 1 new equity share at price of $3.20 per share for every three- share held. A shareholder who owns 900 shares thinks that they will suffer loss in their personal wealth because the new shares are being offered at a price lower than market value of shares will be equal to the theoretical ex-rights price, what would be the effect on the shareholders wealth be if; a) They sell all the rights b) They exercise half the rights and sell the others half c) They do nothing at all Anold has issued 3,000,000 ordinary shares of $1 each, which are at present selling for $4 per share. The company plans to issue rights to purchase 1 new equity share at price of $3.20 per share for every three- share held. A shareholder who owns 900 shares thinks that they will suffer loss in their personal wealth because the new shares are being offered at a price lower than market value of shares will be equal to the theoretical ex-rights price, what would be the effect on the shareholders wealth be if; a) They sell all the rights b) They exercise half the rights and sell the others half c) They do nothing at all

Answer rating: 100% (QA)

Impact of Rights Issue on Shareholder Wealth Anold The shareholder owns 900 shares and the rights offer is 1 new share for every 3 shares held Lets an... View the full answer