Ritzer Company Has 1,000,000 Shares of Stock Outstanding That Sell $\begin{array}{lccc}\text { New Shs } \quad\text { No. of Rights }\quad\text { Value }\quad \text { Ending Frice } \\\end{array}$

question 2

Short Answer

Ritzer Company has 1,000,000 shares of stock outstanding that sell for $90 per share.The company wants to sell stock via a rights offering.The new issue will be used to raise $8 million of new equity,and existing shareholders will receive one right per share held.Theoretically,if the subscription price is $80, (1)how many new shares must be sold, (2)how many rights per share of new stock will be required, (3)what will the value of each right be,and (4)what will the stock price be after the rights offering has been completed? $\begin{array}{lccc}\text { New Shs } \quad\text { No. of Rights }\quad\text { Value }\quad \text { Ending Frice } \\\end{array}$
a. $\begin{array}{llll}100,000\quad \quad\quad\quad 8 \quad\quad\quad\quad \$ 1.38 \quad\quad \$ 88.62\end{array}$
b. $\begin{array}{llll}100,000 \quad\quad\quad\quad 9 \quad\quad\quad\quad \$ 1.05 \quad\quad \$ 88.95\end{array}$
c. $\begin{array}{llll}100,000 \quad\quad\quad\quad 10 \quad\quad\quad\quad \$ 0.91 \quad\quad \$ 89.09\end{array}$
d. $\begin{array}{llll}120,000\quad\quad\quad\quad 8 \quad\quad\quad\quad \$ 1.05 \quad\quad \$ 88.95\end{array}$
e. $\begin{array}{llll}120,000 \quad\quad\quad\quad 8 \quad\quad\quad\quad\$ 1.05 \quad\quad \$ 88.95\end{array}$

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Definitions:

Consumer Goods

Products that are purchased for consumption by the average consumer, including items such as food, clothing, and household products.

Buyer in the Ordinary Course of Business

A legal term describing a person who purchases goods in good faith within the usual and customary practices of a particular trade or business.

Bona Fide Purchaser

A Bona Fide Purchaser is someone who buys property in good faith, without notice of any other party's claim to the property or any defects in the title.

Right to Redeem

The legal right allowing a debtor to reclaim ownership of property by paying off a loan or other obligation, usually within a specific period of time after a foreclosure sale.