Question
Todd Winningham IV has $5,100 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock. Gallagher has issued a rights offering to
Todd Winningham IV has $5,100 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock. Gallagher has issued a rights offering to its common stockholders. Five rights plus $56 cash will buy one new share. Gallaghers stock is selling for $76 ex-rights.
a-1. How many rights could Todd buy with his $5,100? (Do not round intermediate calculations and round your answer to the nearest whole number.)
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a-2. Alternatively, how many shares of stock could he buy with the same $5,100 at $76 per share? (Do not round intermediate calculations and round your answer to the nearest whole number.)
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b. If Todd invests his $5,100 in Gallagher rights and the price of Gallagher stock rises to $80 per share ex-rights, what would his dollar profit on the rights be? (First compute profit per right.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)
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c. If Todd invests his $5,100 in Gallagher stock and the price of the stock rises to $80 per share ex-rights, what would his total dollar profit be? (Use the rounded number of shares from part a-2. Do not round any other intermediate calculations and round your answer to the nearest whole dollar.)
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d. If Todd invests his $5,100 in Gallagher rights and the price of Gallaghers stock falls to $48 per share, ex-rights, what would his dollar profit on the rights be? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole dollar.)
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e. If Todd invests his $5,100 in Gallagher stock and the price of Gallaghers stock falls to $48 per share ex-rights, what would be his total dollar profit? (Negative amount should be indicated by a minus sign. Use the rounded number of shares from part a-2. Do not round any other intermediate calculations and round your answer to the nearest whole dollar.)
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