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Calculate the value of a right in hv resources ltd

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Reference no: EM133168391

Question - HV Resources Ltd is proposing a 1 for 5 pro-rata renounceable rights issue. There are currently 250,000 shares outstanding at $45 each. In accordance with the rights issue there will be 50,000 new shares offered at $40 each.

Required -

1. Calculate the theoretical ex-rights share price of HV Resources Ltd.

2. Calculate the value of a right in HV Resources Ltd.

3. Theoretically, what should happen to the HV Resources Ltd share price on the ex-rights date? Explain.

Reference no: EM133168391

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