Valiant Industries has 20 million shares of stock outstanding at a price of $28 per share.The company wishes to raise more money and plans to do so through a rights issue.Every existing stockholder will receive one right for each share of stock held.For every four rights held by the stockholder,they can buy one share at a price of $28.If all rights are exercised,how much money will be raised in this offer?

Question

Quizplus · Accepted Answer

There are 20 million shares outstanding, and each share will receive one right. Therefore, there will be 20 million rights issued. For every four rights, a shareholder can buy one share at a price of $28. This means that for every one share bought, a shareholder needs to purchase four rights, which cost $28 x 4 = $112.

So, if all rights are exercised, the company will sell 20 million/4 = 5 million new shares. The total amount of money raised will be 5 million x $28 = $140 million.

Therefore, the correct answer is C: $140 million.

Valiant Industries Has 20 Million Shares of Stock Outstanding at a Price