Jack owns 2,000 shares of common stock in a firm with 100,000 total shares outstanding. The firm announces its plan to sell an additional 50,000 shares and offers pre-emptive rights offering. The company offers a $2 discount and the price before the offering is $25, how much does he pay when he exercises the pre-emptive rights?
Jack owns 2,000 shares of common stock in a firm with 100,000 total shares outstanding. The firm announces its plan to sell an additional 50,000 shares and offers pre-emptive rights offering. The company offers a $2 discount and the price before the offering is $25, how much does he pay when he exercises the pre-emptive rights?
Chapter7: Losses—deductions And Limitations
Section: Chapter Questions
Problem 63P
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Question
Jack owns 2,000 shares of common stock in a firm with 100,000 total shares outstanding. The firm announces its plan to sell an additional 50,000 shares and offers pre-emptive rights offering. The company offers a $2 discount and the price before the offering is $25, how much does he pay when he exercises the pre-emptive rights?
Expert Solution
Step 1
Number of shares owned by Jack=2000
Total shares outstanding=100,000
Additional shares=50,000
Price=$25
Discount=$2
Therefor issue price= $23
Jack can buy the shares for $23 when he exercises his right.
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ISBN:
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Author:
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Publisher:
CENGAGE LEARNING - CONSIGNMENT