Rose Co announced a renounceable rights issue to existing shareholders. The pro-rata offer is made on a 2-for-9 basis at an offer price of $32.75 per share. The current market price of Rose Co’s ordinary shares is $34.86.
What are the correct answers to the following?
(i) Cum-rights share price

(ii) Value of one right

(iii) Theoretical ex-rights price

Question

Rose Co announced a renounceable rights issue to existing shareholders. The pro-rata offer is made on a 2-for-9 basis at an offer price of $32.75 per share. The current market price of Rose Co’s ordinary shares is $34.86. 
 What are the correct answers to the following? 
 (i) Cum-rights share price 
 
(ii) Value of one right 
 
(iii) Theoretical ex-rights price

Answer

(i) 34.86 (ii) 1.73 (iii) 34.48

Answer

(i) 34.86 (ii) 2.11 (iii) 34.48

Answer

(i) 32.75 (ii) 2.11 (iii) 31.69

Answer

(i) 33.81 (ii) 1.06 (iii) 26.77

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Rose Co announced a renounceable rights issue to existing shareholders. The pro...

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