Question

pter 17 HW Saved You received partial credit in the previous attempt Todd Winningham IV has $6,800 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock Gallagher has issued a rights offering to its common stockholders. Seven rights plus $82 cash will buy one new share Gallagher's stock is selling for $96 ex rights 0-1. How many rights could Todd buy with his $6,800? (Do not round intermediate calculations and round your answer to the nearest whole number.) Number of rights nces -2. Alternatively, how many shares of stock could he buy with the same $6,800 at $96 per share? (Do not round intermediate calculations and round your answer to the nearest whole number.) Number of shares b. If Todd invests his $6,800 in Gallagher rights and the price of Gallagher stock rises to $98 per share ex.rights, what would his dollar profit on the nghts be? (First compute profit per right.) (Do not found intermediate calculations and round your answer to the nearest whole dollar.) < Prev 20 of 20 Next >

Answer 1

a1 & a2
Value of right	(96-82)/7	$             2	per right
$              6,800	investment	/	$             2	per right	=	3,400	rights
$              6,800	investment	/	$          96	per share	=	71	shares
b.
Value of right	(98-82)/7	$       2.29	per right
$                2.29	per right	-	$             2	per right	=	$        0.29	profit per rights
$                0.29	*	3,400	rights	=	$           971	total profit on rights
c.
(98-96)	$                     2	profit per share
2*71shares	$                142	total dollar profit on th stock
d.
(82-6800)/7	$                960	therefore right value is 0
todd would lose his entire investment
e,
74-96	$                (22)	loss per share
-22*71shares	(1,562)
todd would lose	(1,562)	on his	$    6,800	investment