Q3. 25 marks The Pitt-Panther Corporation has announced a rights offering to obtain $10 million of...

 

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Q3. 25 marks The Pitt-Panther Corporation has announced a rights offering to obtain $10 million of equity financing for a new project. The stock currently sells for $80 per share; there are 2 million shares outstanding. If Pitt-Panther sets the subscription price at $20 per share, how many shares must be sold? How many rights are required in order to buy one share? What is the ex-rights price? What is the value of a right? Suppose you own 100 shares, but intend to sell the rights, instead of exercising the rights and buy new shares. Is this a good decision? What if you decide to exercise your rights, does this affect your total value? If the rights are trading at $10 per right, how will this affect you if you own 100 shares and what would you recommend to someone who does not own shares? How about if they trade at $13 per right? What would be the minimum current share price (including the right) for you to be interested in buying rights at $13 each? Pin Price including rights Pex Price excluding rights = Q3. 25 marks The Pitt-Panther Corporation has announced a rights offering to obtain $10 million of equity financing for a new project. The stock currently sells for $80 per share; there are 2 million shares outstanding. If Pitt-Panther sets the subscription price at $20 per share, how many shares must be sold? How many rights are required in order to buy one share? What is the ex-rights price? What is the value of a right? Suppose you own 100 shares, but intend to sell the rights, instead of exercising the rights and buy new shares. Is this a good decision? What if you decide to exercise your rights, does this affect your total value? If the rights are trading at $10 per right, how will this affect you if you own 100 shares and what would you recommend to someone who does not own shares? How about if they trade at $13 per right? What would be the minimum current share price (including the right) for you to be interested in buying rights at $13 each? Pin Price including rights Pex Price excluding rights =

Answer rating: 100% (QA)

Step 11 1 Total financing required 10000000 If subscription price is 20 Number ... View the full answer