Pine Company Ltd. is planning to market a new product, Pinew. To finance the venture,...
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Pine Company Ltd. is planning to market a new product, Pinew. To finance the venture, it proposes to have a rights issue at Shs 40/= of one new share for each two shares held. The company currently has 2,000,000 shares outstanding with a market price of Shs 150/= per share. Assume that the new funds are invested to earn the same rate of return as Pines other assets.
Required:
i. Share price after 100% subscription of the issue. (6 marks)
ii. Value of the right to buy one share. (3 marks)
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