The Greensborough Corporation has announced a rights offer to raise $30 million for a new journal, the
Question:
The Greensborough Corporation has announced a rights offer to raise $30 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $48 per share, and there are 3.9 million shares outstanding.
a. What is the maximum possible subscription price? What is the minimum?
b. If the subscription price is set at $43 per share, how many shares must be sold? How many rights will it take to buy one share?
c. What is the ex-rights price? What is the value of a right?
d. Show how a shareholder with 1000 shares before the offering and no desire (or money) to buy additional shares is not harmed by the rights offer.
CorporationA 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...
Step by Step Answer:
a The maximum subscription price is the current stock price or 48 The minimum price is anything grea...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0071051606
8th Canadian Edition
Authors: Stephen A. Ross, Randolph W. Westerfield
