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 of stock should be:

Question

Quizplus · Accepted Answer

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

Number of rights needed = (Number of new shares to be issued) / (Number of existing shares + Number of new shares)

Plugging in the given values, we get:

Number of rights needed = 50,000 / (500,000 + 50,000) = 0.0909

Since a fraction of a right is not practical, we need to round up to the nearest whole number. This means that an investor will need 1 full right to buy 10 shares of stock (since each right allows the purchase of 1/10th of a share). Therefore, the answer is choice B)10.

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