Jones Men's Wear would like to expand the firm's operations but needs $3.5 million in additional funding. It has opted to raise the necessary funds through a rights offering at a subscription price of $27.50 a share. The current market price of their stock is $34 a share. How many shares of stock will the firm need to sell through the rights offering to fund the expansion?

Question

Quizplus · Accepted Answer

To raise $3.5 million at a subscription price of $27.50 per share, the firm needs to sell $3,500,000 / $27.50 = 127,272.727 shares. Since the number of shares must be whole, rounding to the nearest whole number gives 127,273 shares.

Jones Men's Wear Would Like to Expand the Firm's Operations