Question
Wang Sisters Corporation currently has 10 million shares of stock outstanding at a price of $20 per share. The company has just announced a rights
Wang Sisters Corporation currently has 10 million shares of stock outstanding at a price of $20 per share. The company has just announced a rights issue. Each existng shareholder is sent one right for every share he or she owns. The company is considering two plans: Plan A requires two rights to purchase one share at a price of $20 per share, and Plan B requires two rights to purchase one share at a price of $10 per share. Assume perfect capital markets. Which plan is beter for the firms shareholders? Which plan is more likely to raise the full amount of capital? Show all your calculations and clearly explain your answer.
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