R.U.Ready Ltd wishes to raise $20 million.If the subscription price is $5, the current share price is $7.50, and there are 8 million shares outstanding, what is the theoretical ex-rights price?

Question

Quizplus · Accepted Answer

The theoretical ex-rights price can be calculated using the formula: [(Number of old shares x Old share price) + (Number of new shares x Subscription price)] / (Number of old shares + Number of new shares). Here, it is: [(8 million x $7.50) + ($20 million / $5 x $5)] / (8 million + $20 million / $5) = ($60 million + $20 million) / (8 million + 4 million) = $80 million / 12 million = $6.67.

RUReady Ltd Wishes to Raise $20 Million