New Image Corporation has 1,000,000 shares outstanding.It wishes to issue 500,000 new shares using rights issue.How many (North American)rights are needed to buy one new share?
A)1 right/share
B)2 rights/share
C)3 rights/share
D)4 rights/share

Question

Quizplus · Accepted Answer

A rights issue allows existing shareholders to buy new shares in proportion to their current holdings. In this case, New Image Corporation has 1,000,000 shares outstanding and wishes to issue 500,000 new shares, which means they will offer 1 new share for every 2 existing shares. Therefore, it will take 2 rights to buy 1 new share, making option B the correct choice.

New Image Corporation Has 1,000,000 Shares Outstanding