Madson plc, a newly established company in Pelvia which is a small market center of the southern Australia has a paid up capital of $2,000 represented by four thousand shares of $0.50 per share. Dividends worth $250 has already been distributed from $750 earned. The current price per earnings ratio was 8.
The company intends to expand an investment which will cost $2,025 and produce an after tax earnings over the foreseeable future at 15% on amount invested.
The project will be financed by existing shareholders at a price 25% below current market value. calculate,
- a)Current market value
- b)Right issue price
- c)Number of new shares to be issued
- d)The price which the shares of the company should be quoted at.