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ABC had earrings, in 2021, with an issued share capital on 1 Jan 2021 of 4,000 equity shares. The shares were 73c paid on 28 February 2021. ABC called up the remaining 27c on 1 April 2021. She issued 800,000 Rs 1 shares fully paid at the market price. On 30 June 2021, ABC gave a rights issue of 2 for 7. The mid-market price immediately before the rights issue was Rs 56, and the exercise price was Rs 54.

Answer :

Final answer:

The total amount of money raised through the rights issue is R2400.

Explanation:

To calculate the total amount of money raised through the rights issue, we need to determine the number of shares issued and the discounted price at which they were offered.

Given that Abc had an issued share capital of 4000 shares on January 1, 2021, and issued 200 additional shares at a price of 73c on February 28, 2021, we can calculate the total number of shares before the rights issue:

  1. Initial shares: 4000
  2. Additional shares issued on February 28, 2021: 200
  3. Total shares before the rights issue: 4000 + 200 = 4200

Next, we need to calculate the number of shares issued through the rights issue. Since the rights issue was 2 for 7, for every 7 shares held, shareholders had the right to purchase 2 additional shares. Therefore, the number of shares issued through the rights issue can be calculated as:

  1. Number of shares held before the rights issue: 4200
  2. Number of shares issued through the rights issue: (2/7) * 4200 = 1200

Now, we can calculate the discounted price at which the shares were offered. The market price before the rights issue was R56, and the exercise price was R54. Since the rights issue allows shareholders to purchase additional shares at a discounted price, the discounted price can be calculated as:

  1. Market price before the rights issue: R56
  2. Exercise price: R54
  3. Discounted price: Market price - Exercise price = R56 - R54 = R2

Finally, we can calculate the total amount of money raised through the rights issue by multiplying the number of shares issued through the rights issue by the discounted price:

  1. Number of shares issued through the rights issue: 1200
  2. Discounted price: R2
  3. Total amount of money raised through the rights issue: 1200 * R2 = R2400

Learn more about calculating the total amount of money raised through a rights issue here:

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