The market price of the stock of the Bruce Corporation is $60 per share and there are
Question:
The market price of the stock of the Bruce Corporation is $60 per share and there are five million outstanding shares of the company. Suppose that the management of this corporation is considering a rights offering in connection with the issuance of 2,500,000 new shares. The terms of the rights offering are as follows: for four rights and $40 (the subscription price), a new share can be acquired. answer the following questions; a) How many old shares given one right to the current shareholders? b)Suppose that you have 2000 shares of the company, how many rights do you have? c)Suppose that you have 2000 shares of the company, how many new shares can you buy under the rights offering? d)What is the market price after the rights offering? what is the value of one right? e)What is the value of one right? f)Determine the dilution effect of this rights offering.