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Selling Rights Wuttke plc wants to raise £3.65 million via a rights issue. The company currently has 490,000 ordinary shares outstanding that sell for £30 per share. Its underwriter has set a...

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Selling Rights Wuttke plc wants to raise £3.65 million via a rights issue. The company currently has 490,000 ordinary shares outstanding that sell for £30 per share. Its underwriter has set a subscription price of £22 per share and will charge Wuttke a 6 per cent spread. If you currently own 6,000 shares of equity in the company and decide not to participate in the rights issue, how much money can you get by selling your rights?

Answered Same Day Dec 24, 2021

Solution

Robert answered on Dec 24 2021
126 Votes
 Net proceeds to the company = subscription price ( 1 – underwriter spread)
= $22(1 – .06) = $20.68
 Now to raise required funds, company is required to sell:-
The New shares offered = amount required /net proceeds
...
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