question archive Shares in Ramadian Ltd are currently trading for $4

Shares in Ramadian Ltd are currently trading for $4

Subject:FinancePrice:2.87 Bought7

Shares in Ramadian Ltd are currently trading for $4.00 each. There are currently 10,000,000 shares on issue. The company is considering various options to restructure its balance sheet. The company announces a one-for-five bonus issue. Calculate the expected ex-bonus share price.

 

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Answer:

*expected ex-bonus share price equals $0.67 per share

Step-by-step explanation

*one-for-five bonus issue =for every 1 share, 5 shares are provided for free

 

ex-bonus share price=worth of the shares/number of shares outstanding after the bonus

worth of shares=share price*number of shares

=4×10,000,000

=$40,000,000

 

*previous shares 10,000,000

bonus shares =5×10,000,000=50,000,000 shares

total shares after bonus=10,000,000+50,000,000=60,000,000 shares

ex-bonus share price=40,000,000/60,000,000

=$0.67 per share