Rights Issues Faff plc has announced a rights issue to raise 50 million for a new journal,
Question:
Rights Issues Faff plc has announced a rights issue to raise £50 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a non-refundable reviewing fee of £5,000 per page. The equity currently sells for £40 per share, and there are 5.2 million shares outstanding.
(a) What is the maximum possible subscription price? What is the minimum?
(b) If the subscription price is set at £35 per share, how many shares must be sold? How many rights will it take to buy one share?
(c) What is the ex-rights price? What is the value of a right?
(d) Show how a shareholder with 1,000 shares before the offering and no desire (or money) to buy additional shares is not harmed by the rights offer.
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780077178239
3rd Edition
Authors: David Hillier, Iain Clacher, Stephen A. Ross