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?

Question

Quizplus · Accepted Answer

To find the number of rights needed to purchase one new share, calculate the number of new shares to be issued: $10,000,000 / $100 = 100,000 new shares. The total number of shares after the rights offering will be 800,000 + 100,000 = 900,000 shares. Each existing share will have one right, so 800,000 rights will be distributed. To find how many rights are needed to buy one new share: 800,000 rights / 100,000 new shares = 8 rights per new share.

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