The New Word Corporation has 1,000,000 shares outstanding at $30/share. If the firm wishes to raise $13.5 million at a subscription price (North American rights offering)of $27/share, calculate the value of a right.
A)$1/right
B)$2/right
C)$3/right
D)$4/right

Question

Quizplus · Accepted Answer

The value of a right is calculated as the difference between the current share price and the subscription price, divided by the number of rights needed to buy one new share. Here, the value of a right is ($30 - $27) / (1,000,000 / (13,500,000 / 27)) = $1/right.

The New Word Corporation Has 1,000,000 Shares Outstanding at $30/share