New Image Corporation has 1,000,000 shares outstanding. It wishes to issue 500,000 new shares using rights issue. How many (North American)rights are needed to buy one new share?
A)One right/share
B)Two rights/share
C)Three rights/share
D)Four rights/share

Question

Quizplus · Accepted Answer

To buy one new share, two rights are needed. This is because 500,000 new shares are being issued and the company already has 1,000,000 shares outstanding. The ratio of new shares to existing shares is 1:2, which means that for every two existing shares, one new share can be purchased with the use of rights. Therefore, two rights are needed to buy one new share.

New Image Corporation Has 1,000,000 Shares Outstanding