A Windsor firm has 800,000 shares outstanding at a market price of $120 a share. It wants to raise $16 million via a rights offering. The subscription price is $100 per share. What is the ex-rights price?

Question

Quizplus · Accepted Answer

The ex-rights price is calculated by adding the market value of the existing shares to the funds raised from the new shares, then dividing by the total number of shares after the rights offering. The calculation is: [(800,000 shares * $120) + $16,000,000] / (800,000 shares + 160,000 new shares) = $116.67.

A Windsor Firm Has 800,000 Shares Outstanding at a Market