Question
ABC Company is considering raising $70 million through a rights issue. It has 40 million ordinary shares outstanding, currently selling for $10 each. The subscription
ABC Company is considering raising $70 million through a rights issue. It has 40 million ordinary shares outstanding, currently selling for $10 each. The subscription price of new shares will be $7 per share.
a. How many shares must be sold to raise the desired funds?
b. How many shares must a shareholder own in order to have one right?
c. What is the theoretical value of the shares ex-rights?
d. What is the value of one right?
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Financial Markets and Institutions
Authors: Frederic S. Mishkin, Stanley G. Eakins
5th edition
