Dr. Doodle wants to raise $18 million through a rights offering. The offering has a subscription price of $9, the current market price is $11, and there are 6 million shares outstanding. How many rights are required to purchase one of the new shares?

Question

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To raise $18 million at a subscription price of $9 per share, Dr. Doodle needs to issue $18 million / $9 = 2 million new shares. With 6 million shares outstanding, the ratio of old shares to new shares is 6 million / 2 million = 3. Therefore, 3 rights are needed to buy one new share.

Dr Doodle Wants to Raise $18 Million Through a Rights