Hi I have a quick question on one of the X assignments (X2 Q2.4) about rights and scrip issues. Looking at the solution I would normally go for the weighted average method, but in this particular case I can't seem to figure out where the numbers come from. Any ideas would be great! Thanks for your help.
Hi Hope this helps: Doing the weighted average for the scrip issue first gives: (1 x 500) / 2 = 250p Then for the subsequent rights issue : we have 1 new share (issued at 200p) for every 5 pre-scrip issue. This is the same as 1 new share (at 200p) for every 10 post-scrip issue shares (priced at 250p). So, weighted average method for the share price post-rights issue : (1 x 200 + 10 x 250) / 11 = 245p Cheers Lynn
