Barstow Industrial Supply has decided to raise $27.52 million in additional funding via a rights offering. The firm will issue one right for each share of stock outstanding. The offering consists of a total of 860,000 new shares. The current market price of the stock is $35. Currently, there are 5.16 million shares outstanding. What is the value of one right?

Question

Quizplus · Accepted Answer

Subscription price = $27.52m/860,000 shares = $32 a shareNumber of shares issued = 1 F1F1F1S1F1F1F10 5.16m = 5.16mNumber of rights needed = 5.16m/860,000 = 6Cost per share = [$32 + (6 F1F1F1S1F1F1F10 $35)]/(1 + 6) = $34.57Value of a right = $35 - $34.57 = $0.43

Barstow Industrial Supply Has Decided to Raise $27