The Blackberry Co. plans on raising $10 million through a rights offering. The subscription price is set at $16. Currently, the company has 1.6 million shares outstanding with a current market price of $19.50 a share. Each shareholder will receive one right for each share of stock they currently own. How many rights will be needed to purchase one new share of stock in this offering?

Question

Quizplus · Accepted Answer

To calculate the number of rights needed to purchase one new share, first determine how many new shares will be issued. This is found by dividing the total amount to be raised ($10 million) by the subscription price per share ($16), which equals 625,000 new shares. Then, divide the total number of outstanding shares (1.6 million) by the number of new shares (625,000) to find the number of rights needed for one new share, which equals 2.56.