CMA Intermediate · Corporate Accounting and Auditing · Earnings per Share (Ind AS 33)
Before a rights issue, Meera Foods Ltd's shares traded at Rs 60 cum-rights. The company offered 1 new share at Rs 45 for every 3 held. What is the theoretical ex-rights fair value per share under Ind AS 33?
The theoretical ex-rights fair value is Rs 56.25. It is the aggregate fair value before the rights (3 shares at Rs 60 = Rs 180) plus the proceeds of Rs 45, divided by the 4 shares outstanding after the exercise of the rights.
- ARs 56.25Correct
- BRs 52.50
- CRs 55.00
- DRs 57.50
Explanation
Take 3 shares at Rs 60 = Rs 180, add proceeds of 1 share at Rs 45 = Rs 225, and divide by 4 shares = Rs 56.25. Simply averaging 60 and 45 gives Rs 52.50, which ignores the 3:1 weighting.
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