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A company has decided to increase its existing share capital by making rights issues to the existing shareholders in the proportion of 1 new share for every 2 old shares held. You are required to calculate the value of the right if the market value of the share at the time of announcement of the right issue is ₹ 576. The company has decided to give one share of ₹ 100 each at a premium of ₹ 188 each.
  • a)
    ₹ 348
  • b)
    ₹ 174
  • c)
    ₹ 96
  • d)
    ₹ 82
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
A company has decided to increase its existing share capital by making...


  • Market Value of the Share: ₹ 576

  • Value of 1 new share: ₹ 100

  • Premium on each new share: ₹ 188

  • Total value of each new share: ₹ 100 + ₹ 188 = ₹ 288

  • Value of 2 old shares: 2 x ₹ 576 = ₹ 1152

  • Value of 1 new share: 1 x ₹ 288 = ₹ 288

  • Total value of 3 shares after rights issue: ₹ 1152 + ₹ 288 = ₹ 1440

  • Value of right: Total value of 3 shares - Total value of 2 old shares = ₹ 1440 - ₹ 1152 = ₹ 288

  • Value of each right: Value of right / 3 = ₹ 288 / 3 = ₹ 96


Therefore, the value of each right is ₹ 96. So, the correct answer is option C.
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A company has decided to increase its existing share capital by making...
Calculation of the value of the right:
1. Market value of the share: $576
2. Face value of the share: $100
3. Premium on the share: $188
4. Total value of the new share: $100 + $188 = $288

Calculation of the value of the right:
- When a rights issue is made, the existing shareholders are given the option to buy new shares at a discounted price. In this case, the company is offering 1 new share for every 2 old shares held.
- In order to calculate the value of the right, we need to find out how much a shareholder would have to pay to purchase a new share through the rights issue.
- Since the market value of the share is $576 and the total value of the new share is $288, the discounted price of the new share through the rights issue would be $576 - $288 = $288.
- Therefore, the value of the right is the discounted price of the new share, which is $288.
Therefore, the value of the right is $288, which is option (c) $96.
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A company has decided to increase its existing share capital by making rights issues to the existing shareholders in the proportion of 1 new share for every 2 old shares held. You are required to calculate the value of the right if the market value of the share at the time of announcement of the right issue is 576. The company has decided to give one share of 100 each at a premium of 188 each.a) 348b) 174c) 96d) 82Correct answer is option 'C'. Can you explain this answer?
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A company has decided to increase its existing share capital by making rights issues to the existing shareholders in the proportion of 1 new share for every 2 old shares held. You are required to calculate the value of the right if the market value of the share at the time of announcement of the right issue is 576. The company has decided to give one share of 100 each at a premium of 188 each.a) 348b) 174c) 96d) 82Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company has decided to increase its existing share capital by making rights issues to the existing shareholders in the proportion of 1 new share for every 2 old shares held. You are required to calculate the value of the right if the market value of the share at the time of announcement of the right issue is 576. The company has decided to give one share of 100 each at a premium of 188 each.a) 348b) 174c) 96d) 82Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company has decided to increase its existing share capital by making rights issues to the existing shareholders in the proportion of 1 new share for every 2 old shares held. You are required to calculate the value of the right if the market value of the share at the time of announcement of the right issue is 576. The company has decided to give one share of 100 each at a premium of 188 each.a) 348b) 174c) 96d) 82Correct answer is option 'C'. Can you explain this answer?.
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