Associated Breweries is planning to market unleaded beer. To finance the venture, it proposes to make a rights issue with a subscription price of $10. One new share can be purchased for each two shares held. The company currently has outstanding 100,000 shares priced at $40 a share. Assuming that the new money is invested to earn a fair return, give values for the following: (Do not round intermediate calculations. Enter your answers in dollars not millions.)

Question

Ray May

Business

26 August, 02:51

Associated Breweries is planning to market unleaded beer. To finance the venture, it proposes to make a rights issue with a subscription price of $10. One new share can be purchased for each two shares held. The company currently has outstanding 100,000 shares priced at $40 a share. Assuming that the new money is invested to earn a fair return, give values for the following: (Do not round intermediate calculations. Enter your answers in dollars not millions.)

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Kamora Brewer · Answer 1

Number of new shares:

= 140,000 * (1:2)

= 70,000

Amount of new investment:

= 70,000*$10

= $700,000

Total value of company after issue:

= $700,000+140,000*$40

= $6,300,000

Total number of shares after issue:

= 140,000+70,000

= 210,000

Share price after issue:

= $6,300,000:210,000

= $30