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The Board of Directors of Company T is considering a rights issue to fund a...

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The Board of Directors of Company T is considering a rights issue to fund a new investment opportunity which has a zero NPV.

 

The Board of Directors wishes to explain to shareholders what the theoretical impact on their wealth will be as a result of different possible actions during the rights issue.

 

Which THREE of the following statements in respect of theoretical shareholder wealth are true?

A.

If shareholders exercise their full rights there will be no impact on their wealth.

B.

If the shareholders allow their rights to lapse (do nothing) there will be no impact on their wealth.

C.

If shareholders sell their entire rights entitlement there will be no impact on their wealth.

D.

If the shareholders only partially exercise their rights and allow the remainder to lapse there will be no impact on their wealth.

E.

If shareholders partially exercise their rights and sell the remaining rights entitlement there will be no impact on their wealth.

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