Polecat plc has 18 million $0.50 ordinary shares in issue. The current stock marketâ€¨value of these...

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Polecat plc has 18 million $0.50 ordinary shares in issue. Thecurrent stock marketâ€¨value of these is $1.70 per share. Thedirectors have decided to make a one-for-threeâ€¨rights issue at$1.25 each. Julie owns 3,000 Polecat ordinary shares.â€¨Assuming thatthe rights issue will be the only influence on the share price:â€¨(a) What, in theory, will be the ex-rights price of the shares(that is, the price of theâ€¨shares once the rights issue has takenplace)?â€¨(b) For how much, in theory, could Julie sell the â€˜rightâ€™to buy one share?â€¨(c) Will it matter to Julie if she allows therights to lapse (that is, she does nothing)?

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a Ex right price of share Theoretical exrights price TERP is a situation where the stock and the right attached to the stock is separated TERP is a calculated price for a companys stock shares after issuing new rightsshares See Answer

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