# In 2004 the Pandora made a rights issue at \$5 a share of one new share for every four shares held. Before the issue there were 100 million shares outstanding and the share price was \$6. For questions (a) to (c) assume that all rights were exercised. (a) What was the total amount of new money raised? (b) What was the value of the right to buy one new share? (c) What was the prospective stock price after the issue? (d) How far could the stock price after the issue fall before shareholders would be unwilling to take up their rights? (e) Suppose that the rights issue is at \$4 rather than \$5 per share. How many new shares would it have needed to sell to raise the same sum of money? How do your answers to (b) and (d) change? Are the shareholders any better or worse off with the \$4 exercise price?

Aggregate ungathered portion-outs 100 favorite and portion-out figure is 6dollars and hues figure is 5

Aggregate hues childrend is 100/4= 25 favorite (as single suitable is loving restraint complete 4 portion-outs held)

A) aggregate equality of currency tall is 25×5 = 125 favorite

B) prize of hues is negotiate prize – mediocre figure

Mediocre figure is( 6×4+5)/5=5.8

So prize of suitable is 6-5.8= 0.2

C)as hues per portion-out decline ascribable to extension in no of portion-outs portion-out figure is slight to lapse

Let us suppose eps to be 10

Succeeding hues children EPS is 10×100/125= 8

So figure is slight to lapse 20%

So innovating figure of portion-out is 6-20%= 4.8

D) explained in c

e)if hues figure is 4

No of portion-outs to childrend to instruct the loving equality is 25million×5/4=31.25 favorite

If 4 is hues portion-out figure hues prize is 6×4+4/5=5.6(formula explained in b)

Restraint caluculation of portion-out figure succeeding children

By doing identical process as over EPS succeeding hues children is 10×100/131.5=7.6(grand EPS antecedently children is 10)

Magnitude of lapse is (10-7.6)/10= 24%

Innovating portion-out figure is 6-24%= 4.56

As portion-out holders getting it restraint 4 whose mv is 4.56 it is better to portion-out holders