Question
Todd Winningham IV has $6,600 to invest. Todd owns shares of Gallagher Tennis Clubs Inc. Gallagher has issued a rights offering to its common shareholders.
Todd Winningham IV has $6,600 to invest. Todd owns shares of Gallagher Tennis Clubs Inc. Gallagher has issued a rights offering to its common shareholders. Four rights plus $76 cash will buy one new share. Gallaghers stock is selling for $88 ex-rights.
a-1. How many rights could Todd buy with his $6,600?
Number of rights
a-2. Alternatively, how many shares of stock could he buy with the same $6,600 at $88 per share? (Round the final answer to the nearest whole number.)
Number of shares
b. If Todd invests his $6,600 in Gallagher rights and the price of Gallagher stock rises to $90 per share ex-rights, what would be his dollar profit on the rights? (First compute profits per right.) (Do not round intermediate calculations.)
Dollar profit $
c. If Todd invests his $6,600 in Gallagher stock and the price of the stock rises to $90 per share ex-rights, what would be his total dollar profit? (Round intermediate calculations.)
Total dollar profit $
d. What would be the answer to part b if the price of Gallaghers stock falls to $68 per share ex-rights instead of rising to $90?(Negative answer should be indicated by a minus sign.)
Dollar profit / loss on the rights $
e. If Todd invests his $6,600 in Gallagher stock and the price of the stock falls to $68 per share ex-rights, what would his dollar profit be? (Negative answer should be indicated by a minus sign.)
Dollar profit / loss on the stock $
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