Dill Owns Five Per Cent of the Outstanding Shares in Pickle

question 36

Multiple Choice

Dill owns five per cent of the outstanding shares in Pickle Ltd,which has just announced a one for five rights issue with a subscription price of $1.90.The current 'cum rights' price for Pickle shares is $2.20.The number of outstanding shares in Pickle Ltd is 5000.Calculate the value of Dill's investment ex-rights.

• A)$537.50
• B)$645.00
• C)$550.00
• D)$615.00

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Definitions:

Withholding Allowance

A claim made by an employee on a W-4 form to reduce the amount of tax withheld from their paycheck.

Federal Income Tax

An annual financial obligation collected by the IRS from individuals, corporations, trusts, and other legal organizations.

Gross Earnings

The total income earned by an individual or a business before any deductions or taxes are taken out.

Withholding Allowance

A claim made by an employee on a form W-4 to determine the amount of income tax withheld from their paycheck.