I need the last 2 questions Serbanika Limited has issued share capital of 2 million common shares, par value $1.00. The board of the company has decided itneeds to raise $1million, net of issue costs, to finance a new product. It has been suggested that the additional finance be raisedby means of a 1-for-4 rights issue. The issue price will be at a 20% discount to the current market price of $2.75 per share andissue costs are expected to be $50 000. Calculate and explain the following:(i) The theoretical ex-rights price per share;(ii) The net cash raised;(iii) The value of the rights.(iv) Explain the advantages and disadvantages of using rights as a financing method for corporations.

Finance is a blood for any organization, without which company gets paralyzed. Company raise finance…

Answered: (iii) The value of the rights. (iv)…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter3: The Financial Environment: Markets, Institutions And Investment Banking

Section: Chapter Questions

Problem 16PROB

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Cisco Corporation has planned right issue of 75,000,000 Ordinary shares which has par value of PKR 10/- each.The stock of Cisco Corporation is illiquid in nature so therefore, the right issue price will be 38% discount to the current market price which is PKR 65/- per share. The proceeds from this right issue will be utilized for Balancing, Modernization and Replacement (BMR) of existing unit. A local brokerage house has been appointed as underwriter by the Company for the subject right issue. The brokerage house has approached other financial institutions for underwriting commitment in the subject right issue. Underwriting Commission will be 0.75% and Take up Commission will be 1.25%. Stack Ford Bank has given underwriting commitment of PKR 500Mn for the aforementioned right issue. Required: (a) What will be the underwriting and take up commission amount for Stack Ford Bank if right issue is 60% subscribed? (b) After 6 months of this…
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(iii) The value of the rights. (iv) Explain the advantages and disadvantages of using rights as a financing method for corporations.