A public limited company has 9,00,000 shares outstanding at current market price of Rs. 130 per share. The company needs Rs. 2.25 crores to finance its proposed new project. The board of the company has decided to issue rights shares to raise the required money at Rs. 75 per share (as subscription price) to ensure that the rights issue is fully subscribed. How many rights are required to purchase a new share ?

The correct answer is Three rights

Key Points

•  Information Given in Statement:
•     Number of shares = 900,000
•     Required Finance = Rupees 2.25 Crores
  •  i.e. 2,25,00,000
•     Current M.P (Market Price) = Rupees 130 per share
• Subscription price = Rupees 75 per share

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Computation :

• Firstly, we have to find out the Market value of company:
  •       = 9,00,000 * 130
  •       = 1,17,000,000

• A company needs to issue shares, for Rupees 2,25,00,000 with Subscription price of Rupees 75:
  •       =  2,25,00,000 / 75
  •       = 3,00,000 shares

• Now, with the help of given information we can easily find out the rights that are required to purchase a new share.
  •        = 9,00,000 / 3,00,000
  •        = 3 Rights

• So, three rights are needed to purchase a new share.

Hence, the correct answer is Three rights.