Which One of These Conditions Must Exist If a Rights

question 50

Multiple Choice

Which one of these conditions must exist if a rights offering is to be successful?

• A)The rights cannot be resold.
• B)The market price must be less than the subscription price.
• C)Shareholders must be able to obtain one new share for every right they receive.
• D)The issuer must guarantee to repurchase the rights at the offer price if the market price declines.
• E)The subscription price must be less than the market price.

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Definitions:

Creditor

An individual, organization, or other entity that lends money or extends credit to another party.

Asset

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide future benefit.

Invested Cash

Funds that are placed into a business by its owners or shareholders with the expectation of generating profits or income.

Capital

The financial resources or assets owned by an individual or business, often used to generate income or produce goods and services.