What Would You Expect to Be the Market Price of Stock

question 90

Multiple Choice

What would you expect to be the market price of stock after a sold-out rights issue if each existing shareholder purchases one new share at $60 for each three that he or she currently holds and the current share price is $100?

• A) $75.00
• B) $80.00
• C) $85.00
• D) $90.00

---

Definitions:

Balance Sheet

A report detailing a firm's assets, liabilities, and owners' equity at a particular moment.

Order of Magnitude

A classification of scale or size of a quantity, where each class is ten times greater or smaller than the one before.

Gross Method

An accounting practice where purchases are recorded at the total invoice cost without deducting any purchase discounts.

Net Method

An accounting approach where discounts for early payment are assumed to be taken and thus are deducted from the cost of purchases.