Total amount of money raised

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A company is proposing a rights offering at €20 of 1 new share for every 19 held. Currently the company has 19 million shares outstanding and the market share price is €30.

a) How many shares will be issued and what will be the total amount of money raised?

b) What will be the prospective stock price after the issue?

c) What is the value of the right to buy a new share?

d) How far would the total value of the company fall before shareholders would be unwilling to take up their rights? Justify your answer.

e) Ms. X owns 351,404 shares before the issue. How many shares can Ms. X buy without paying extra cash (neutral transaction)? Calculate the number of remaining rights after the neutral transaction.

f) Mr. Y owns 512,100 shares as a result of a neutral transaction. Calculate the number of shares owned by Mr. Y before the rights issue?

Reference no: EM132546393

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