CMA Intermediate · Financial Management and Business Data Analytics · Sources of Finance
Kaveri Foods Ltd has paid-up equity capital of Rs 50 lakh in shares of Rs 10 each. It makes a rights issue of 1 share for every 5 held at Rs 40 per share. The current market price is Rs 55 cum-rights. What is the theoretical ex-rights price per share?
The theoretical ex-rights price is the total value of the shares after the issue divided by the number of shares. Five shares at Rs 55 plus one at Rs 40 gives Rs 315 for six shares, which is Rs 52.50 per share.
- ARs 52.00Correct
- BRs 50.00
- CRs 52.50
- DRs 47.50
Explanation
For 5 shares held: value = 5 x 55 = 275. Add 1 new share at 40 = 315. Total shares = 6. Ex-rights price = 315/6 = Rs 52.50. Check: 315/6 = 52.5, so the correct figure is Rs 52.50.
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