Marti owns 300 shares of ABC stock with a current value of $26 a share.The firm just issued one right for each of the 14,200 shares outstanding.The purchase of a share through the offering requires four rights plus $23.Assume Marti decides to sell her rights.All else constant,Marti will have ________ in cash and stock valued at ________ once the rights offering is completed.

Question

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Marti owns 300 shares, so she will receive 300 rights.

To purchase one share, she needs four rights plus $23, so each right has a value of $23/4 = $5.75.

If Marti decides to sell her rights, she will receive $5.75 x 300 = $1,725 in cash.

She will not participate in the rights offering, so her number of shares will remain the same at 300.

After the rights offering, the total number of shares outstanding will be 14,200 + 14,200 = 28,400.

Marti's share of the company will now be 300/28,400 = 1.0563%.

The value of each share after the rights offering will be (current value + new money raised) / (total number of shares), which is ($26 + $23) / 28,400 = $1.59.

The value of Marti's shares after the rights offering will be 300 x $1.59 = $477.

Therefore, Marti will have $1,725 + $477 = $2,202 in cash and stock valued at $7,620 once the rights offering is completed.

Marti Owns 300 Shares of ABC Stock with a Current