Leah, Inc., is proposing a rights offering. Presently there are 200,000 shares outstanding at $45 each....
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Leah, Inc., is proposing a rights offering. Presently there are 200,000 shares outstanding at $45 each. There will be 25,000 new shares offered at $40 each. |
| a. | What is the new market value of the company? (Do not round intermediate calculations.) |
| b. | How many rights are associated with one of the new shares? (Do not round intermediate calculations.) |
| c. | What is the ex-rights price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| d. | What is the value of a right? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Homework Answers
a)
New market value = Existing shares x price per share + rights offering x price per share
New market value =(200000*45)+(25000*40)
New market value =10000000
b)
Number of shares needed for one right share = outstanding shares/rights share issued
Number of shares needed for one right share =200000/25000
Number of shares needed for one right share =8
c)
Ex-rights per share = new market value of the company/(existing shares + rights offerings)
Ex-rights per share =10000000/(200000+25000)
Ex-rights per share =44.44
d)
Value of the right = The price of the outstanding share – the new price of the share
Value of the right =45-44.44
Value of the right =0.56
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