Hi there, for everyone's benefit, the question I'm referring to is: 2) Hold plc has 20 million shares outstanding priced at £5 a share. A rights issue will allow one share to be purchased for every 5 shares currently held by shareholders for £3 each. Which of the following is true. A The number of shares outstanding will fall to 16 million B The firm will raise £32 million C The stock price will fall to £4.67 D The company's total value will decrease to £88 million. The correct answer is C. However, I think C is very poorly worded. We do not know what the stock price will fall to. We can calculate a theoretical ex rights price of £4.67 but we cannot say with certainty that there is no other added value to consider. As a result, I think that all of the answers are incorrect and that C is simply the "least worst" answer. Would anyone disagree? I would really like to be proved wrong. Thanks, Ravi.
