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A company decides to increase its equity capital through undertaking a right issue. Planning to raise additional capital of 10 million. And the company has 2,500,000 outstanding common shares with a current market price of $40 per share. Shareholders need 10 rights to buy a new share.

1) Calculate the value of a right and the ex-rights price per share.

2) Aiman has 20,000 shares of its common stock and $50,000 cash. Assume Aiman will exercise his rights to buy new shares, determine the amount of gain or loss for him.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92881383

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