Schraeder Corporation has 20,000 shares outstanding at $30 each.The firm expects to raise $200,000 via a rights offering at a subscription price of $25.How many rights are required for each new share?

Question

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To find the number of rights required for each new share, divide the total number of existing shares by the number of new shares to be issued. The firm plans to raise $200,000 at $25 per share, which means 8,000 new shares will be issued ($200,000 / $25). With 20,000 existing shares, the number of rights required per new share is 20,000 / 8,000 = 2.5.

Schraeder Corporation Has 20,000 Shares Outstanding at $30 Each