1. A company wants to raise equity and issues 2 new shares for every 5 old shares. The old price is 14 euros per share, and the price of new shares is 10 euros per share. The company delivers subscription rights to existing shareholders. Disregard possible commissions and canon costs.

(a) Calculate the price of the subscription right.

(b) An investor owns 1000 shares of the company. What do you recommend to avoid dilution of ownership?

(c) How can existing shareholders proceed to buy new shares? Which possibilities they have?

Answer rating: 100% (QA)

a To calculate the price of the subscription right we can use the formula Price of the subscription right Old price New share price Number of new shares received per old share 1 Given Old price 14 eur... View the full answer