Theoretical value of shareholding, Financial Accounting

Q. Theoretical value of shareholding?

(i) Theoretical value of shareholding

Theoretical ex-rights value =

((No. shares in issue×Market value) + (No. rights shares× rights share price))/ Total shares in issue post rights

((5m×1.60) + (1m×1.30))/ 6m

= $1.55

Subsequent to taking up the rights issue James Brown will hold 10000 + (0·2 × 10000) = 12000 shares. The theoretical worth of the holding at $1·55 per share is thus $18600.

(ii) Theoretical value of rights

The value of the rights per share = Theoretical ex-rights price - Cost of taking up the rights

= $1·55 - $1·30

= $0·25 per share

If James Brown sells all of his rights to 2000 shares he will receive 2000 × $0·25 = $500.

Posted Date: 7/11/2013 8:04:08 AM | Location : United States







Related Discussions:- Theoretical value of shareholding, Assignment Help, Ask Question on Theoretical value of shareholding, Get Answer, Expert's Help, Theoretical value of shareholding Discussions

Write discussion on Theoretical value of shareholding
Your posts are moderated
Related Questions
Thatcher Corporation's bonds will mature in 12 years. The bonds have a face value of $1,000 and an 11.5% coupon rate, paid semi-yearly. The price of the bonds is $1,050. The bonds

1. Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earnings are growing at a rate of 5%, and its tax rate i

Question: Airways Catering prepares dinner for several airlines, and sales average 500,000 dinners per month. The cost of each dinner is made up principally of the cost of meat

Resulting trusts Resulting trusts occur where equity regards the property which is held by a trustee as belonging in equity to the person who transferred it to, or caused it to

An intersting point to not is that there is a difference in the tax treatment of income from Limitied Liability Companies (LLCs) and Corporations. What is this difference and what

Suppose that the one-period rate is 4%. Explain why a two-period rate of 6% cannot be an equilibrium when individuals expect the one-period rate to remain constant.

Application of discharge Application may be made at any time after adjudication, but cannot be heard until the conclusion of the public examination. Notice of the hearing must

XYZ Inc., an Ontario-based company on the cutting edge of technology, is analyzing the possibility of providing university-level courses for York University. This virtual universit

IAS 1 rules IAS 1 requires companies to observe the following rules in preparing published financial statements: 1) The financial statements should reflect a true and fair v

Q. What is Depreciation Reserve Fund ? Depreciation Reserve Fund is the fund specially reserved for replacement of assets. Once the assets are purchased from the capital money