The Standard Company is interested in raising new equity capital through rights issue/offering. Its current capital consists of 900,000 shares. It would set subscription price at $ 50 a share of one new share for every 25 shares held and anticipates that shares would sell for $58 with rights. Required: i. What was the total amount of new money raised? ii. What was the prospective stock price after the issue? iii. How many additional shares an investor holding 96,000 shares of the company can purchase on exercising his rights? iv. What was theoretical value of a right when share sells (i) with rights and (ii) ex-right v. What amount the investor holding 96,000 shares of the company would get for his rights immediately after the share goes ex-right Short Questions: i. Why is a security offering of new common stock often accompanied by a share price reaction around the time of the announcement? ii. A supplier for Industries Inc. offers credit terms of 3/15 net 45. What is the annualized interest rate charged by the supplier for not taking the cash discount? iii. Why is profit maximization inferior to wealth maximization as a firm goal? iv. A $1,000, 13-week (91 days) United States Treasury bill can be purchased for $985. Calculate the equivalent annual yield? v. Differentiate the features of debt and equity as a source of finance

Answer rating: 100% (QA)

i Total amount of new money raised Total shares before rights issue 900000 Entitlement ratio is 125 ... View the full answer