Marti owns 200 shares of ABC stock with a current value of $31 a share.The firm just issued one right for each of the 3,500 shares outstanding.The purchase of a share through the offering requires three rights plus $24.Assume Marti decides to sell her rights.All else constant,Marti will have ___ in cash and stock valued at ____ once the rights offering is completed.

Question

Quizplus · Accepted Answer

Value of one right = $31 - {[($31 × 3)+ $24]/(3 + 1)} = $1.75Ex-rights stock price = $31 - 1.75 = $29.25Marti's cash value = $1.75 × 200 × 1 = $350Marti's stock value = $29.25 × 200 = $5,850

Marti Owns 200 Shares of ABC Stock with a Current