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107 The liquidity of Baja Corporation has been heading downward, and it contemplates a rights issue.There are currently 2 million shares outstanding with a market value of $60 each.The firm needs to raise $24 million and wants you to design a rights issue that will allow the new stock price to be no lower than $55 and for there to be no more than 2.5 million shares outstanding after the issue.How many shares must be held to obtain the right to one new share, and what will be the price of the new share?
Call Provision
Agreement giving the corporation the option to repurchase the bond at a specified price before maturity.
Bond Indenture
A legal contract detailing the terms and conditions under which bonds are issued, including the interest rate, maturity date, and other conditions.
Time Premium
The portion of an option's price that exceeds its intrinsic value, reflecting the value of time left until expiration.
Exercise Price
The price at which an option holder can buy or sell the underlying security.
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