Your company has 100 million outstanding shares and the current share price is $12 per person.

to share. Your firm will have an offer of rights that requires 10 rights to purchase a share.

price of $10 per share.

a) What will be the new share price if it is 100% after the right offer is completed?

participation?

b) What will be the new share price in case of 80% after the right offer is completed?

participation?

c) Calculate the total amount you will have deposited in the company upon your participation.

entitlement offer and you have 20 shares

d) Calculate the total new value of your portfolio and 100% of the shares if you participate

so are the owners

e) Calculate the total new value of your portfolio and 80% of the shares if you participate

so are the owners

f) If you do not participate except 100%, calculate the total new value of your portfolio

shareholders participate. (Use price if 100% participation)

g) Calculate the total new value and 80% of your portfolio if you disagree.

shareholders participate.

h) Some are concerned that the $10 per share price will not encourage

At what price does participation in an entitlement offer encourage greater participation?

i) What advantage does a right offer have over a cash offer to issue new shares?