Alpha limited plans to raise the needed funds of $3,600,000 through
Next we need to calculate how many rights are necessary for an individual shareholder to buy a single new share priced at 10% below their current market value. To do this we divide one (1) new share by 10%, which is 0.1 and then multiply it with 100%. This gives us 1 right per 0.1 new share or 10 rights per each newly-issued share.
The final calculation is determining what value each right holds in terms of purchasing a single newly-issued share at a reduced subscription price. This can easily be found by subtracting ten percent from the original stock’s value – in this case 12$ – giving us 1080 cents = 10$ 8 cents as the value associated with each right that holders have been granted.
In conclusion Alpha Limited needs 333,333.34 new shares worth $10 80 cents each resulting in 3 600 000 total capital raised if all rights were exercised; along with 3 600 000 additional rights being granted entitling holders 1 additional newly-priced stock for every ten held