Question

Summit Corp.’s stock is currently selling at $32 per share. There are 1 million shares outstanding. The firm is planning to raise $2 million to finance a new project. What are the ex-rights stock price, the value of a right, and the appropriate subscription prices under the following scenarios?
a. Two shares of outstanding stock are entitled to purchase one additional share of the new issue.
b. Four shares of outstanding stock are entitled to purchase one additional share of the new issue.
c. How does the stockholders’ wealth change from part (a) to part (b)?



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  • CreatedAugust 28, 2014
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