Myer Holdings Limited has a share price of $2.82. The company has made a renounceable rights issue offer to shareholders. The offer is a three-for-ten pro-rata issue of ordinary shares at $2.60 per share.
What is the theoretical ex-rights share price of the firm? What is the value of the right?
Explain the effect of the offer being renounce able. Explain why an actual ex-rights price of a share may at times differ from the calculated theoretical price.