Stone Shoe Co. has concluded that additional equity financing will be needed to expand operations and that
Question:
Stone Shoe Co. has concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. It has correctly determined that as a result of the rights offering, the share price will fall from $65 to $63.18 ($65 is the rights-on price; $63.18 is the ex-rights price, also known as the when-issued price). The company is seeking $15 million in additional funds with a per share subscription price equal to $50. How many shares are there currently, before the offering? (Assume that the increment to the market value of the equity equals the gross proceeds from the offering.)
Step by Step Answer:
Corporate Finance
ISBN: 978-0071339575
7th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro