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Calculate the theoretical ex rights price

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Question - Cabby plc has a paid-up ordinary share capital of K1,500,000 represented by 6 million shares of K0.25 each. It has no loan capital. Earnings after tax in the most recent year were K1,200,000. The P/E ratio of the company is 12. The company is planning to make a large new investment which will cost K5,040,000, and is considering raising the necessary finance through a rights issue at K1.92.

Required -

1. Calculate the current market price of Cabby plc's ordinary shares.

2. Calculate the theoretical ex rights price.

Reference no: EM133037457

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