The current price of Sun Asia Corporation's stock is RM28 per share, and the number of shares outstanding is 1.2 million. To finance its new project, the company plans to raise RM2 million through rights issue as follows: three shares of outstanding stock are entitled to purchase one additional share of the new issue. a) Calculate the ex-rights price, the appropriate subscription price, and value of a right.

How does the stockholders' wealth change if rights issue change to four shares of outstanding stock are entitled to purchase one additional share of the new issue?

Glendale Corporation is planning to replace its old machine that is not economically feasible due to high costs of electricity and maintenance. The company has two options: Lease machine A or purchase machine B. The lease payments for machine A will be RM80,000 for 5 years, due at the beginning of each year, and it will save the company RM29,000 per year through cost savings. The alternative, machine B, can be purchased for RM365,000, and will save the company RM32,000 per year. To purchase the machine, the company can borrow from a bank at an interest rate of 10% on the remaining balance and the bank requires five annual principal payments of RM73,000. Glendale has a target debt-asset ratio of 67% and a tax rate of 21%. Both machines will be depreciated on a straight-line basis and have no salvage value after 5 years.

 Should Glendale Corporation lease Machine A or purchase Machine B?

Answer rating: 100% (QA)

1 The first part is to calculate the exrights price the subscription price and the value of a right for Sun Asia Corporations stock rights issue 2 In ... View the full answer