Kingee has 900000 shares outstanding whose current market price is 130. The company needs 22.5 million to finance a proposed expansion. The BOD has declared that rights be issued at sh.75 per share to raise he required finance.
Required,
Calculate;
The number of rights required to buy one new share.
The price of the share after the rights issue (ex rights price).
The theoretical value of the right.
Consider the effect of the rights issue on a share holder under the three options available. Assume he has 3 shares sh.75 cash in hand.