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Global ltd. , a pharmaceutical company, has concluded that additional equity financing will be needed t o expand operations and that the needed funds will be best obtained through a rights issue. Global is planning to raise £30 million to finance its operations while the number of outstanding shares is 4 million . The shares of the company are currently sell i ng for £ 3 0 per share .

a) If the subscription price is set at £ 2 0 per share, how many shares must be sold?

b) How many rights will it take to buy one share?

c) What is the ex - rights price and the value of a right?

d) Show how a shareholder with 500 shares before the offering and no desire (or money) to buy additional shares is not harmed by the rights offer.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92767667

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