The Himalayan Herbal Company has planned to raise long-term fund. Recently it has announced a rights offer to raise Rs 80 million for a new plant.…
BBS Fundamentals of Corporate Finance · 2080 · Solved Question with Answer
The Himalayan Herbal Company has planned to raise long-term fund. Recently it has announced a rights offer to raise Rs 80 million for a new plant. The stock has Rs 100 par value and currently sells for Rs 250 per share, and there are 1.6 million shares outstanding
a. What is the maximum possible subscription price? What is the minimum?
b. If the subscription price is set at Rs 100 per share, how many shares must be sold?
c. How many rights will it take to buy one share?
d. What is the value of a right?
e. What is the ex-rights price?
f. Show how a shareholder with 2,000 shares before the offering and no desire (or money) to buy additional shares is not harmed by the rights offer