QUESTION 8 Bailey Shoes Limited has 3 million ordinary $1 shares on issue and has decided to make a 1 for-3 renounceable rights issue at $1.85 to finance expansion into the Perth and Brisbane markets. The issue will be underwritten by Ware Partners for $40 000. Immediately following the announcement of the issue, Bailey Shoes shares were trad ing at $2.25 (a) What is the theoretical value of the right to one new share and the theoretical value of Baileys shares ex rights? (b) How much will Bailey Shoes raise by the issue, assuming that the issue is fully subscribed? QUESTION 9 A company with a paid up capital of 1 million shares wishes to raise $12 million by way of a rights issue. The shares are currently sell ing at $84 each and the intended subscription price is $60 per share. Calculate (a) The number of shares to be issued (c) The theoretical value of the right to one new share one share under the rights issue (b) The number of shares needed to be held to purchas (d) The theoretical value of one share ex rights QUESTION 10 Hargar Ltd has decided to issue add itional ordinary shares through a rights issue. Hangar has 90 million ordinary shares issued and plans to issue an additional 10 million shares on the basis of a 1-for-9 rights issue, at a subscription price of $2 per share. If Hargar's cum rights price is $4.50, determine the following (a) How much does Hangar intend to raise? (b) Joe Seff is currently a shareholder of Hargar. How many shares must Joe hold to get one new share (c) What is the theoretical value of a right? (d) What is the share's theoretical price ex rights? (e) How much do you expect the share's price to drop on the ex rights date? Why? (f Joe Seff currently owns 90 Hargar shares. How many shares will he hold if he accepts the rights issue? How does the rights issue affect his wealth? (g) If Hargar had decided on an exercise price of $4 per share to raise the desired level of funds. what would have been the cond it ions of the rights issue? what would have happened to the share's theoretical ex rights price and the theoretical value of a right? (Assume that the amount of funds to be raised is unchanged)September 2003 QUESTION 8 Bailey Shoes Limited has 3 million ordinary $1 shares on issue and has decided to make a 1- for-3 renounceable rights issue at $1.85 to finance expansion into the Perth and Brisbane markets. The issue will be underwritten by Ware Partners for $40 000. Immediately following the announcement of the issue, Bailey Shoes shares were trading at $2.25. (a) What is the theoretical value of the right to one new share and the theoretical value of Bailey's shares ex rights? (b) How much will Bailey Shoes raise by the issue, assuming that the issue is fully subscribed? QUESTION 9 A company with a paid up capital of 1 million shares wishes to raise $12 million by way of a rights issue. The shares are currently selling at $84 each and the intended subscription price is $60 per share. Calculate: (a) The number of shares to be issued. (b) The number of shares needed to be held to purchase one share under the rights issue. (c) The theoretical value of the right to one new share. (d) The theoretical value of one share ex rights. QUESTION 10 Hargar Ltd has decided to issue additional ordinary shares through a rights issue. Hargar has 90 million ordinary shares issued and plans to issue an additional 10 million shares on the basis of a 1-for-9 rights issue, at a subscription price of $2 per share. If Hargar's cum rights price is $4.50, determine the following: (a) How much does Hargar intend to raise? (b) Joe Seff is currently a shareholder of Hargar. How many shares must Joe hold to get one new share? (c) What is the theoretical value of a right? (d) What is the share's theoretical price ex rights? (e) How much do you expect the share's price to drop on the ex rights date? Why? (f) Joe Seff currently owns 90 Hargar shares. How many shares will he hold if he accepts the rights issue? How does the rights issue affect his wealth? (g) If Hargar had decided on an exercise price of $4 per share to raise the desired level of funds, what would have been the conditions of the rights issue? What would have happened to the share's theoretical ex rights price and the theoretical value of a right? (Assume that the amount of funds to be raised is unchanged)