Question
Todd Winningham IV has $5,400 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock. Gallagher has issued a rights offering to
Todd Winningham IV has $5,400 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock. Gallagher has issued a rights offering to its common stockholders. Six rights plus $62 cash will buy one new share. Gallaghers stock is selling for $80 ex-rights.
1. Alternatively, how many shares of stock could he buy with the same $5,400 at $80 per share?
2. If Todd invests his $5,400 in Gallagher rights and the price of Gallagher stock rises to $86 per share ex-rights, what would his dollar profit on the rights be?
3. If Todd invests his $5,400 in Gallagher stock and the price of the stock rises to $86 per share ex-rights, what would his total dollar profit be?
4.If Todd invests his $5,400 in Gallagher rights and the price of Gallaghers stock falls to $54 per share, ex-rights, what would his dollar profit on the rights be?
5. If Todd invests his $5,400 in Gallagher stock and the price of Gallaghers stock falls to $54 per share ex-rights, what would be his total dollar profit?
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