Luther Industries Currently Has 100 Million Shares of Stock Outstanding

question 20

Multiple Choice

Luther Industries currently has 100 million shares of stock outstanding at a price of $25 per share.The company would like to raise money and has announced a rights issue.Every existing shareholder will be sent one right per share of stock that he or she owns.The company plans to require twenty rights to purchase one share at a price of $20 per share.The amount of money that Luther will raise through its rights offering is closest to?

• A)$500 million
• B)$125 million
• C)$100 million
• D)$400 million
• E)$200 million

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Definitions:

Relative Advantages

The degree to which an innovation or solution is perceived to be better than the idea, program, or product it replaces.

Dishonors

Refers to the refusal or inability of a party to accept or pay a bill of exchange, check, or draft when presented for payment.

Liability

Being under a legal obligation to answer for something, especially with respect to owing money or fulfilling legal requirements.

Mortgage Interest Rates

The cost of borrowing money expressed as a percentage of the total amount of the loan, applied to mortgages.