Answer:
Market Value =$2,620,000
Explanation:
A right issue is the offer of new shares to existing shareholders at a price lower than the current market price. This new shares are issued to each existing shareholders in proportion of their existing shareholding. This proportion is referred to as the terms of the right issue.
The terms of rights in the question = 10,000 units new shares for 100,000 units existing shares= 1 ratio 10 i.e 1:10
The new market value of the firm would be
unit price(after issue) × Number of shares after issue
Unit price after issue is the weighed average value of the existing shares and right shares
Unit price = (10×24)+(1×22)/(10+1)= 23.818
Total number of shares = 100,000+ 10,000= 110,000
Market Value of the firm = 110,000×23.82=2,620,000
Market Value =$2,620,000
