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HF Holding Plc. has 40 million ordinary shares of 50p is in issue. These shares are currently valued on the London Stock Exchange at £1.80 per share. The company directors have decided to offer existing shareholders one new share for every four shares held at £1.35 ie. a one-for-four issue. What is the value of the rights offer? Select the correct answer from the option listed below. E0.24 E0.49 0.48 E0.36

Question

HF Holding Plc. has 40 million ordinary shares of 50p is in issue. These shares are currently valued on the
London Stock Exchange at £1.80 per share. The company directors have decided to offer existing shareholders
one new share for every four shares held at £1.35 ie. a one-for-four issue.
What is the value of the rights offer?
Select the correct answer from the option listed below.
E0.24
E0.49
0.48
E0.36

HF Holding Plc. has 40 million ordinary shares of 50p is in issue. These shares are currently valued on the London Stock Exchange at £1.80 per share. The company directors have decided to offer existing shareholders one new share for every four shares held at £1.35 ie. a one-for-four issue. What is the value of the rights offer? Select the correct answer from the option listed below. E0.24 E0.49 0.48 E0.36

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WynElite · Tutor for 8 years

Answer

Now let's calculate and substitute the given conditions into the formulas what we've thought out. <br />## **In Step 1:**<br />The original total shares are 40 million. After substituting into the formula we concluded:<br />The new shares = 40,000,000/4=10,000,000 shares<br />## **In Step 2:**<br />Substitute the calculation result from the first step into the second equation: <br />Rights offers Value= £1.35*10,000,000 = £13,500,000 <br />We got the final solution to the question.<br />The value of the rights offer = \( £ 13,500,000 \). The correct answer to be identified was not listed above.

Explain

## Step1: <br />First, we need to calculate the number of new shares that estar shareholders will receive by the issuance policy. From the condition mentioned, we know that for every 4 original shares, investors are awarded one additional share. Therefore, the increment of shares is the total number of shares that HF Holding Plc. initially issued divided by 4: <br />### **The New Shares= Total original shares / 4**<br /><br />## Step2:<br />Then, we saw that the price of every new share HF Holding Plc. issued is \( £ 1.35 \). The total value of new shares, hence, is the price of per further share times the total amount of new shares:<br />### **Rights offers Value = The Price of Each New Share * The New Shares**
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