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A firm has 10,000,000 shares outstanding with a price per share of $27.00 (previous to Rights Issue). It does a Rights Issue where it offers
A firm has 10,000,000 shares outstanding with a price per share of $27.00 (previous to "Rights Issue").
It does a "Rights Issue" where it offers 2,000,000 shares to existing shareholders at a price of $15.80.
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company.
The "Rights Issue" is fully subscribed, that is existing shareholders purchase all the shares offered.
What will the share price be after the dividend has been paid?
Assume that Modigliani-Miller and its assumptions are true.
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