The Overland Corporation intends to issue 50,000 new shares to raise funds for expansion of current plant facilities.The current share price is €40 and there are 500,000 shares outstanding.The number of rights needed to buy a share should be:

Question

Quizplus · Accepted Answer

To determine the number of rights needed to buy a new share, we need to use the formula:

Rights needed = (Number of new shares / Number of outstanding shares)

In this case, the number of new shares is 50,000 and the number of outstanding shares is 500,000.

Rights needed = (50,000 / 500,000) 
Rights needed = 0.1

This means that for every existing share, shareholders will receive 0.1 rights. To purchase 1 new share, a shareholder would need 10 rights (10 x 0.1 = 1). Therefore, the answer is B, 10.

The Overland Corporation Intends to Issue 50,000 New Shares to Raise