My Math Forum  

Go Back   My Math Forum > Science Forums > Economics

Economics Economics Forum - Financial Mathematics, Econometrics, Operations Research, Mathematical Finance, Computational Finance

LinkBack Thread Tools Display Modes
May 9th, 2016, 07:50 AM   #1
Senior Member
Joined: Dec 2010

Posts: 233
Thanks: 0

Equity Finance ( Right issue share question)

Morgan plc has 20 million ordinary shares of 50p each in issue. The shares are currently trading on the stock market at $1.50. An investment opportunity has recently been identified which will need to be financed by existing shareholders. It has been decided by the board of directors that an additional $10 million will be raised by rights issue of 1 for 5 to support the investment. The new shares will be issued at 20% discount of the current share prices.

Question : Keith , a shareholder who owns 10000 shares is undecided on what action to take. As an investment consultant , you have been approached by Keith for advice on the proposal right issue. Calculate how Keith's wealth will be affected if he takes each of the following decisions

i) Exercises the right
ii) Sells all the rights
iii) Allows the right offer to lapse

This is the last part of the question which I have no idea to do it. The previous part was to find theoretical ex-right price and value of share. I have no problem on that and I really need help and explanation for this part of the question . Thank you.
hoyy1kolko is offline  

  My Math Forum > Science Forums > Economics

equity, finance, issue, question, share

Thread Tools
Display Modes

Similar Threads
Thread Thread Starter Forum Replies Last Post
Finance tax question financegirlques Economics 2 September 22nd, 2013 08:37 PM
(share) Tool to Share Math Formulae using LaTeX nvquanghuy New Users 1 September 8th, 2013 08:06 AM
Finance Homework Question - Help Please MichaelN Algebra 1 December 2nd, 2012 01:25 PM
algebra finance question slaysliver Algebra 1 February 15th, 2011 12:14 PM
Help Finance Question krystalmox Applied Math 2 January 30th, 2009 07:16 AM

Copyright © 2018 My Math Forum. All rights reserved.