Question

QUCJLIUM PONTIL3) Joffrey Corporation, a publicly traded company, is requiring an additional $5,000,000. The company has decided that a rights offering could raise the funds that are required. Currently there are 300,000 outstanding common shares and the market price of $55.00 per share. Each shareholder would receive 1 right for every share they own. The subscription price will be $50.00. This means that 100,000 new shares will be issued ($5,000,000/$50). Given this information, 300,000 old shares/100,000 new shares would mean 3 rights plus the subscription price will be required to get 1 new share. Sansa Stark is a shareholder and has 6,000 shares of Joffrey's Corporation and $260,000 cash in her bank account. She is Queen of the North! What is the value of one right? Round to 2 decimal places. What is the value of Sansa's portfolio before the rights issue? Round to the nearest dollar. If Sansa exercises her rights and participates in the rights offering, what is the value of her portfolio? Round to the nearest dollar. If Sansa does not exercise her rights, but sells them in the rights off period, how much total cash does Sansa have now? Round to the nearest dollar. If Sansa does nothing, how much does she lose (if any)? Round to the nearest dollar. NO NEGATIVE REQUIRED.

Answer 1

Value of 3 rights = Market Price of 3 shares+ Subscription price of 1 new share

=55*3+1*50=215

Value of 1 right = 215/3

=71.67