Common stock and investment

banking process-II
Solution to numerical problem
Right offering

•No
  of right share to be issued(N) =
No of right required to purchase one new share( #)=
Value of each right()=
Ex right Price ()=Market Price()-Value of right()
Ex right Price ()=
Question No. 9
•  Given information,
Current selling price of jhapa electronic company(=Rs.180 per share
Subscription price per share (=Rs.140
No of right required to purchase one new share (#) =3
(a) Compute a theoretical value of of a right when the stock is selling
right on ((=?
Here,
Theoretical value of right (=== Rs.10
 ……..Question No. 9
•   Value of one share when it goes to ex right price()=?
(b)
Here,
Ex right price of share()= Market price()-Value of right()
=Rs.180- Rs.10
=Rs 170
(c ) Ex right price()=Rs.172
Value of right () =?
Here, Theoretical value of right when stock goest to ex-right (=== Rs.10.67
Question no 10
•  Additional fund to be raised =Rs. 1,000,000
• Current market price of the stock ()=Rs. 150
• Subscription Price()=RS.100
• No of share outstanding (N) =40,000
(a) Number of new share to be issued under right offering =?
Here, No of new share =
=
=10000 shares
 …….Question no 10
•(b)  No of right required to purchase one new share(#)=?
Here,
No of right required to purchase one new share(#)=
=
=4
Number of right to purchase one new share is 4. it indicates shareholders
should have 4 shares previously to purchase 1 new share.
(c ) Theoretical value of right (=== Rs.10
…….Question no 10
•(d)Theoretical
  value of share when stock goes ex-right()=?
Here,
Ex right Price ()=Market Price()-Value of right()
=Rs.150-Rs.10
=Rs140
(e) Ex right price ()=Rs.145,
Subscription price ()=Rs.100
Value of right()=?
Here,
Value of right ()====Rs.11.25
Question no.11

•   information,
Given
Current market price of the stock of Zenith company()=Rs. 130
Subscription price= ()=Rs.100
No of right required to purchase one new share(#)=2
(a) Value of each right (Vr)=?
Here,
Theoretical value of right (=== Rs.10
(b) What effect will the issuance of the right have on the original market price?
After the issuance o right share, original market price per share will decrease to extent of value
of right . In tthis problem also market price will decrease to Rs 120(Rs130-Rs10) after the
issuance of share.
Ex right Price ()=Market Price()-Value of right()=Rs130-Rs.10=Rs120
Question no 12
•   information,
Given
No of shares outstanding (N) =240,000 shares
Market Price per share(Po) =Rs.80
No. new shares to be issued=60,000 shares
Offered price/Subscription price(Ps)=Rs 60
(a) What is the new market value of the company?
Here,
Market value of the company = No of outstanding sharesmarket Price per share + No. new
shares to be issued Subscription price per share
= 240,000 shares Rs80 +60,000 Shares Rs.60
= Rs2,28,00,000.00
=
……Question no 12
(b) How many right are associated with one new shares(#)=?
Hee