You own 500 shares of common stock in a firm that has 2 million shares outstanding. The firm announces a plan to sell an additional 500,000 shares through a rights offering.
a) How many rights to purchase new shares will you receive?
b) Suppose that the market price per share is $30, but each right allows you to purchase a share of stock for $27. What should be the value of one right?
c) If you sold your rights, how much money should you make?

Question

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The Answer of You own 500 shares of common stock in a firm that has 2 million shares outstanding. The firm announces a plan to sell an additional 500,000 shares through a rights offering.
a) How many rights to purchase new shares will you receive?
b) Suppose that the market price per share is $30, but each right allows you to purchase a share of stock for $27. What should be the value of one right?
c) If you sold your rights, how much money should you make?

You Own 500 Shares of Common Stock in a Firm