Tidelle Corporation has 2,000,000 voting shares of common stock outstanding with a market price of $10/share. The firm is planning a rights offering with a $5/share subscription price to issue 2,000,000 new shares.
a. What is the number of rights required to purchase one new share of the firm's common stock?
b. What is the theoretical value of a right if the stock is selling rights-on?
c. What is the value of a right on the ex-rights date?

Question

Quizplus · Accepted Answer

The Answer of Tidelle Corporation has 2,000,000 voting shares of common stock outstanding with a market price of $10/share. The firm is planning a rights offering with a $5/share subscription price to issue 2,000,000 new shares.
a. What is the number of rights required to purchase one new share of the firm's common stock?
b. What is the theoretical value of a right if the stock is selling rights-on?
c. What is the value of a right on the ex-rights date?

Tidelle Corporation Has 2,000,000 Voting Shares of Common Stock Outstanding