Question
PU Ltd contemplates raising $2,000,000 through rights offering. The subscription price is $25 per share. The company has 320,000 shares outstanding. The stock is currently
PU Ltd contemplates raising $2,000,000 through rights offering. The subscription price is $25 per share. The company has 320,000 shares outstanding. The stock is currently trading at $30 per share.
(a) Calculate the number of rights necessary to buy one new share of stock. (Show your calculations).
(b) Calculate the ex-rights stock price and the value of a right. (Show your calculations).
(c) Briefly explain what you should do if the price of a right is lower than that from part (b).
Step by Step Solution
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Step: 1
a To calculate the number of rights necessary to buy one new share of stock we use the formula Numbe...
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Intermediate Accounting Volume 2
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
8th Edition
1260881245, 9781260881240
