Micro-Electronics Corporation (MEC) has just announced that it will issue 10 million shares of common stock through

Question:

Micro-Electronics Corporation (MEC) has just announced that it will issue 10 million shares of common stock through a rights issue at a subscription price of $20.

Before the announcement, MEC shares were trading at $26, and there were 50 million shares outstanding.

• How many rights will MEC grant to its existing shareholders?

• How many rights will an investor need to buy one new share?

• What will happen to MEC's share price when the rights issue is announced?

• What should be the value of one right?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...