Rights Stone Shoe Co. has concluded that additional equity financing will be needed to expand operations and

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Rights 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 $80 to $74.50 ($80 is the “rights-on” price; $74.50 is the ex-rights price, also known as the whenissued price). The company is seeking $15 million in additional funds with a per-share subscription price equal to $40. 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.) LO.1

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Corporate Finance

ISBN: 9780073105901

8th Edition

Authors: Jeffrey Jaffe, Bradford D Jordan

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