A Victoria firm has 800,000 shares outstanding at a market price of $120 a share. It wants to raise $10 million via a rights offering. The subscription price is $100 per share. How many rights are required to purchase one of the new shares?

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To raise $10 million at a subscription price of $100 per share, the firm needs to issue 100,000 new shares ($10,000,000 / $100). With 800,000 shares outstanding, the number of rights needed to purchase one new share is 800,000 / 100,000 = 8.0.

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