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1. A firm has 1,000,000 shares outstanding with a price per share of $25.10 (previous to any dividend payment). It decides to pay out cash

1. A firm has 1,000,000 shares outstanding with a price per share of $25.10 (previous to any dividend payment).

It decides to pay out cash dividend of $2,100,000.

What will the share price be after the dividend has been paid?

Assume that Modigliani-Miller and its assumptions are true.

2. A firm has 10,000,000 shares outstanding with a price per share of $22.80 (previous to "Rights Issue").

It does a "Rights Issue" where it offers 2,000,000 shares to existing shareholders at a price of $16.30.

A rights issue is an invitation to existing shareholders to purchase additional new shares in the company.

https://www.investopedia.com/investing/understanding-rights-issues/

The "Rights Issue" is fully subscribed, that is existing shareholders purchase all the shares offered.

What will the share price be after the dividend has been paid?

Assume that Modigliani-Miller and its assumptions are true.

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