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:

Common Law

A body of unwritten laws based on legal precedents established by the courts, used predominantly in England and countries influenced by English legal systems.

Hydraulic Fracturing

A process used in the oil and gas industry to increase the flow of oil or gas from a well by injecting high-pressure fluid into the surrounding rock.

Fracking

A method of extracting natural gas or oil from the earth by injecting fluid into subterranean rocks at high pressure.

Civil Law

Civil law is a legal system that deals with disputes between private parties, and includes laws such as contracts, torts, and property, distinguishing it from criminal law.