Author Topic: What is the correct procedure to calculate X Rates  (Read 1115 times)

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Offline ksestocks_dot_com

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What is the correct procedure to calculate X Rates
« Reply #-1 on: October 23, 2015, 02:51:53 PM »
I think there will be no difference of opinion here for calculating XD, XB, XR, XDXB and XDXR rates. What bothers me is XBXR and XDXBXR.

In my opinion for XBXR, the impact of bonus and right shares shall be calculated individually and then total of both impacts shall be deducted from the closing price to get XBXR.

In contrast there is another opinion which says that XBXR shall be calculated jointly
e.g. As a test case we have CP=Rs.100, B=20%, R=10% @ Rs50

Method 1:
bonus impact = (100 x 0.2)/1.2 = 16.67
Right impact = ((100 - 50) x 0.1)/1.1 = 4.55
Total impact = 16.67 + 4.55 = 21.22
XBXR = 100 - 21.22 = 78.78

Method 2:
XBXR = (100 + (50x0.1))/1.3 = 80.77

Now my argument here is that when the second method is used, we face two anomalies
1. We are infact under stating the overall net effect in second method as compared to the first method
2. We can not bifurcate the overall net effect into bonus impact and right shares impact.

Now please discuss why we use second method in KSE instead of first method.

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What is the correct procedure to calculate X Rates
« Reply #-1 on: October 23, 2015, 02:51:53 PM »

Offline Dehan

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Re: What is the correct procedure to calculate X Rates
« on: October 23, 2015, 08:53:38 PM »
I think there will be no difference of opinion here for calculating XD, XB, XR, XDXB and XDXR rates. What bothers me is XBXR and XDXBXR.

In my opinion for XBXR, the impact of bonus and right shares shall be calculated individually and then total of both impacts shall be deducted from the closing price to get XBXR.

In contrast there is another opinion which says that XBXR shall be calculated jointly
e.g. As a test case we have CP=Rs.100, B=20%, R=10% @ Rs50

Method 1:
bonus impact = (100 x 0.2)/1.2 = 16.67
Right impact = ((100 - 50) x 0.1)/1.1 = 4.55
Total impact = 16.67 + 4.55 = 21.22
XBXR = 100 - 21.22 = 78.78

Method 2:
XBXR = (100 + (50x0.1))/1.3 = 80.77

Now my argument here is that when the second method is used, we face two anomalies
1. We are infact under stating the overall net effect in second method as compared to the first method
2. We can not bifurcate the overall net effect into bonus impact and right shares impact.

Now please discuss why we use second method in KSE instead of first method.
http://www.ksestocks.com/XRateCalculator
From the above link not only Xprice is can be calculated, but the respective formulas are also given.
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Offline Farzooq

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Re: What is the correct procedure to calculate X Rates
« Reply #1 on: October 23, 2015, 09:27:00 PM »
Calculate xb first and then xr. you are doing both at the same time.
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Offline ksestocks_dot_com

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Re: What is the correct procedure to calculate X Rates
« Reply #2 on: October 24, 2015, 12:13:54 AM »
Calculate xb first and then xr. you are doing both at the same time.
We can do this only if the bonus shares are also eligible for right issue. In this case second method becomes irrelevant and the result of method 1 will be 80.30 instead of 80.77

Anyways I am now considering to switch to method 2 on live version because KSE is following that method but I will wait till the end of this weekend so that others can toss in their input.

Offline SBM

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Re: What is the correct procedure to calculate X Rates
« Reply #3 on: October 24, 2015, 05:20:00 PM »
Calculate xb first and then xr. you are doing both at the same time.
We can do this only if the bonus shares are also eligible for right issue. In this case second method becomes irrelevant and the result of method 1 will be 80.30 instead of 80.77

Anyways I am now considering to switch to method 2 on live version because KSE is following that method but I will wait till the end of this weekend so that others can toss in their input.

hmm
For me the 2nd method works because stock price is market cap divided by number of shares
The company is increasing number of shares by 30% and market cap by 5 rupees
so xbxr should be 105/1.3

I dont know why answers from method 1 differ from method 2
I am bad at maths.
but i am thinking about it.                                                                                                                                                                                                                                                                                       
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Offline M&M

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Re: What is the correct procedure to calculate X Rates
« Reply #4 on: October 24, 2015, 08:27:29 PM »
If KSE is following the second method then simply use that one.
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Offline ksestocks_dot_com

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Re: What is the correct procedure to calculate X Rates
« Reply #5 on: October 24, 2015, 09:08:41 PM »

hmm
For me the 2nd method works because stock price is market cap divided by number of shares
The company is increasing number of shares by 30% and market cap by 5 rupees
so xbxr should be 105/1.3

I dont know why answers from method 1 differ from method 2
I am bad at maths.
but i am thinking about it.


If KSE is following the second method then simply use that one.

Yeah! rightly said.

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