Cs question

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Please calculate the value of rights if-

Number of rights shares offered(n)  2000/=

Number of shares held(n)                   1000/=

Ex-right price(Pex) 18/=

Rights offer price(Pof) 15/=

Face value of shares  10/=

and please tell me the method & formula also...plz..

Replies (1)

Ex-Right Value of a Share:   P = MN+S / N+1

P = Market Value of Share ex-right

M = Cum-Market Price

S = Issue price of a new share

N = Number of existing shares required for getting one right share (in your case it is 1000/2000 = 0.5)

Hence,

P = M x 0.5+15 / 0.5+1

or, 18 = M x 0.5 + 15 / 0.5+1

Therefore, Ex- right value of share (P) = 24

Again,

Value of Right= Market value of Cum right share - Ex right value of share

i.e, 24-18 = 6

Alternatively, Value of Right (R) = M-S/N+1

   = 24-15/0.5+1

   = 6

 


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