Currently,you own 5.4 per cent of the outstanding stock of Keiffer Industries.The firm has decided to issue additional shares of stock and has given you the first option to purchase 5.4 per cent of those additional shares.Which one of the following will you be participating in if you opt to purchase the shares you have been offered?

Question

Quizplus · Accepted Answer

A rights offer allows existing shareholders to purchase new shares at a discounted price before they're offered to the public. In this scenario, the firm has given the current shareholder the option to purchase 5.4% of the additional shares, which aligns with a rights offer. The other options (term loan, private placement, IPO, and bond issue) don't involve the purchase of additional shares by existing shareholders.

Currently,you Own 5