High Voltage plc has 1 million ordinary shares with a nominal value of 50 pence and a market value of £4.00 each.The company makes a rights issue,offering existing shareholders one share for every 5 they already hold at a price of £3.50.After the rights issue,what is the theoretical value of the shares?

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The theoretical value of the shares after the rights issue is £3.92. This is calculated as follows:Market value of existing shares before rights issue = £4.00 x 1,000,000 = £4,000,000Number of new shares issued = 1,000,000 / 5 = 200,000Total number of shares after rights issue = 1,000,000 + 200,000 = 1,200,000Total market value of shares after rights issue = £4,000,000 + (200,000 x £3.50) = £4,700,000Theoretical value of shares after rights issue = £4,700,000 / 1,200,000 = £3.92

High Voltage Plc Has 1 Million Ordinary Shares with a Nominal