NISM Certifications · NISM-Series-XV: Research Analyst · Corporate Actions
A company with 10 crore shares outstanding announces a rights issue of 2 crore shares at Rs 150 per share. The cum-rights market price is Rs 200. What is the theoretical ex-rights price per share?
The theoretical ex-rights price is Rs 191.67. Five existing shares worth Rs 1,000 plus one new share at Rs 150 give Rs 1,150 across six shares, which averages to Rs 191.67 per share after the rights issue.
- ARs 191.67Correct
- BRs 175.00
- CRs 200.00
- DRs 183.33
Explanation
Ratio is 10:2 = 5 old shares for 1 new share. Value of 5 old shares = 5 x 200 = 1,000; add 1 new share at 150 = 1,150. Divide by 6 shares = Rs 191.67. Rs 183.33 would result from using 2 old shares to 1 new, which is the wrong ratio.
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