question archive 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.
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