Financial Management Issues Report 2022

Financial
Management

FINANCE 1
Question 2
Number of ordinary shares 600000
Shareholder's fund 700000
Profit After Tax 140000
Amount to be raised 180000
Price before issue of Ex-right shares 1.9
Number of shares to be reissued 1.8 100000
Number of shares to be reissued 1.6 112500
Number of shares to be reissued 1.4 128571
The number of shares is to be reissued on the basis of three options such as 1.8, 1.6 and 1.4. The
company issues the shares by 100000, 1125000 and 128571 with the price rate 1.8, 1.6, and 1.4
respectively as the amount is 180000 is raised by the organization for issuing the shares.
Number of share has been evaluated by dividing the raised amount with the adjusting price rate
such as 180000/1.8.
Computation of theoretical ex-rights fair value per share

FINANCE 2
1320000 1320000 1320000
700000 712500 728571
1.88571 1.85263 1.81176
Ex-rights fair value per share has been evaluated with this formula:
Fair value of all outstanding shares immediately prior to exercise of rights shares issued in the
exercise +Total amount received from exercise
Number of shares outstanding prior to exercise+ Number of shares issued in the Exercise
(Xplained, 2014)
As per the evaluation, 1.88, 1.85 and 1.877 are the Ex-rights fair value per share with the 1.8, 1.6
and 1.4 price rates respectively.
Computation of adjustment
facto
Fair value per share prior to exercise of
rights
Theoretical ex-rights value per share
1.9 1.9 1.9
1.88571
1.8526
3
1.8117
6