Sun Ltd. offers new shares of ₹100 each at 25% premium to existing shareholders on one for four basis. The cum-right market price of a share is ₹150. Calculate: Value of a right Ex-right market price of a share Interpret

Ex-right value of the shares: = [Cum-right value of the existing shares + (Right shares x Issue Price)] / (Existing number of shares + No. of right shares) = [(₹150 x 4 shares) + (₹125 x 1 share)] / (4 + 1 shares) = 725/5 shares = ₹145 per share Value of right = Cum-right value of the share - Ex-right value of the share = 150 - 145 = ₹5 per share Hence, any one desirous of having a confirmed allotment of one share from the company at ₹125 will have to pay ₹20 (4 shares x ₹5) to an existing shareholder holding 4 shares and willing to renounce his right of buying one share in favour of that person.