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Calculate theoretical ex-right price and adjustment factor

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Reference no: EM133014992

Problem - XYZ Ltd is finalising the calculation of its basic earnings per share. The entity has a profit before tax of $20,000,000 and a profit after tax of $14,000,000. It paid a dividend of $1000,000 to preference shareholders out of this profit. The preference shares are classified as equity.

XYZ Ltd provides the following details:

At 1 July 2019 XYZ Ltd had a total of 5,000,000 ordinary shares on issue.

On 1st September 2019, XYZ Ltd issued a further fully paid shares on the basis of a one-for-four (1:4) rights issue at a price of $3.50 per share. The share price immediately prior to the rights issue was $5.10. All shareholders took up the rights issue.

The basic EPS for the year ending 30 June 2019 was 245 cents.

Required - Calculate the theoretical ex-right price and adjustment factor.

Reference no: EM133014992

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