Following information is supplied by K Ltd.: Number of shares outstanding prior to right issue - 2,50,000 shares. Right issue - two new share for…

Fair value of shares immediately prior to exercise of rights + Total amount received from exercise Number of shares outstanding prior to exercise + Number of shares issued in the exercise 102 x 2,50,000 Shares + 98 x 1,00,000 shares 3,50,000 shares Theoretical ex-rights fair value per share = 100.86 Computation of adjustment factor: Fair value per share prior to exercise of rights Theoretical ex - rights value per share = 102/100.86 = 1.01 Computation of earnings per share: EPS for the year 2022-23 as originally reported:50,00,000/2,50,000 shares = 20 EPS for the year 2022-23 restated for rights issue: = 50,00,000/ (2,50,000 shares x 1.01) = 19.80 EPS for the year 2023-24 including effects of rights issue: EPS = 75,00,000/3,25,625* = 23.03 * [(2,50,000 x 1.01 x 3/12) + (3,50,000 x 9/12)] =63,125 + 2,62,500 = 3,25,625 shares Note: Financial year (ended 31st March) is considered as accounting year while giving the above answer.