Question
SGA concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights issue.
SGA concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights issue. It has correctly determined that as a result of the rights issue, the share price will fall from 33,80 to 30,00 (33,80 is the rights-on price; 30,00 is the ex-rights price, also known as the when-issued price). The company is seeking 10 million in additional funds with a per-share subscription price equal to 20. (Assume that the increment to the market value of the equity equals the gross proceeds from the offering.) How many shares are there currently (before the offering)?
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