TOYSrYOU needs to raise $5 million in a rights offering. If the subscription price is $10 per share, the stock price is $12.50 per share, and there are 4 million shares outstanding, what will the stock
Sell for ex-rights?

Question

Quizplus · Accepted Answer

The ex-rights price is calculated using the formula: (Old shares * Old price + New shares * Subscription price) / Total shares. Here, it is (4,000,000 * $12.50 + 500,000 * $10) / 4,500,000 = $12.22.

TOYSrYOU Needs to Raise $5 Million in a Rights Offering