Nosam Ltd has just raised $100 million by an issue of 5 million converting preference shares.If each CPS converts into 20 ordinary shares on conversion,calculate the expected ordinary share price immediately prior to conversion.Assume the conversion discount is 5 per cent.
A)$1.05 per share.
B)$5.26 per share.
C)$1.00 per share.
D)$5.05 per share.

Question

Quizplus · Accepted Answer

The expected ordinary share price immediately prior to conversion is $1.05 per share. This is calculated by dividing the issue price of the CPS by the number of ordinary shares that each CPS converts into, and then multiplying by the conversion discount. In this case, the issue price of the CPS is $100 million, the number of ordinary shares that each CPS converts into is 20, and the conversion discount is 5%. Therefore, the expected ordinary share price immediately prior to conversion is $100 million / (5 million x 20) x 0.95 = $1.05 per share.

Nosam Ltd Has Just Raised $100 Million by an Issue