You Own 500 Shares of Common Stock in a Firm

question 26

Essay

You own 500 shares of common stock in a firm that has two million shares outstanding. The firm announces a plan to sell an additional 500,000 shares through a rights offering.
A) How many rights to purchase new shares will you receive?
B) Suppose that the market price per share is $30,but each right allows you to purchase a share of stock for $27. What should be the value of one right?
C) If you sold your rights,how much money should you make?

• A) How many rights to purchase new shares will you receive?
• B) Suppose that the market price per share is $30,but each right allows you to purchase a share of stock for $27. What should be the value of one right?
• C) If you sold your rights,how much money should you make?