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8 May, 23:18

Associated Breweries is planning to market unleaded beer. To finance the venture, it proposes to make a rights issue with a subscription price of $10. One new share can be purchased for each two shares held. The company currently has outstanding 100,000 shares priced at $40 a share. Assuming that the new money is invested to earn a fair return, give values for the following: (Do not round intermediate calculations. Enter your answers in dollars not millions.)

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  1. 9 May, 01:14
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    Number of new shares:

    = 140,000 * (1:2)

    = 70,000

    Amount of new investment:

    = 70,000*$10

    = $700,000

    Total value of company after issue:

    = $700,000+140,000*$40

    = $6,300,000

    Total number of shares after issue:

    = 140,000+70,000

    = 210,000

    Share price after issue:

    = $6,300,000:210,000

    = $30
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