CAF-6 · Chapter 11 · Question 7 of 15
In a rights issue, the exercise price is often lower than the fair value of the shares. How does this affect the EPS calculation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) It requires a retrospective bonus fraction adjustment to the shares outstanding before the rights issue.
Explanation
A rights issue contains a bonus element due to the discounted price. This requires adjusting historical shares by a bonus fraction based on the theoretical ex-rights price.
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