A Rights Issue Offers the Firm's Shareholders One New Share

question 78

Multiple Choice

A rights issue offers the firm's shareholders one new share of stock at $40 for every three shares of stock they currently own.What should be the stock price after the rights issue if the stock sells for $80 per share before the issue?

• A) $56.67
• B) $60.00
• C) $70.00
• D) $71.33

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Definitions:

Exchange Rate

The price of one country's currency expressed in another country's currency, facilitating international trade and investment.

Multinational Corporations

Companies that operate in multiple countries, managing production or delivering services in more than one country.

Divisions and Branches

Parts of a company that operate semi-independently but are not separate legal entities; branches are local offices or shops, while divisions are specialized departments.

Foreign Stocks

Shares of companies based outside the investor's own country, traded on foreign stock exchanges.