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 $12 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 F1F1F1S1F1F1F10 2.6m = 2.6m; Number of shares needed = $21.4m/$12 = 1,783,333.33; Rights needed for each new share = 2.6m/1,783,333.33 = 1.46 rights

The Motor Plant Wants to Raise $21