The Motor Plant wants to raise $21.4 million through a rights offering so it can modernize its facilities.The subscription price for the offering is set at $11 a share.Currently,the company has 2.6 million shares of stock outstanding at a market price of $12.50 a share.Each shareholder will receive one right for each share of stock they own.How many rights will a shareholder need to purchase one new share of stock in this offering?

Question

Quizplus · Accepted Answer

Number of rights issued = 1 × 2.6m = 2.6m; Number of shares needed = $21.4m/$11 = 1,945,454.55; Rights needed for each new share = 2.6m/1,945,454.55 = 1.34 rights

The Motor Plant Wants to Raise $21