Teasler Inc. currently trades at $40 and has 9 million shares outstanding with Net Income of $12 Million. The Board decides to use a rights offering to raise new capital. Each shareholder will receive one right for each share. Laila Sims currently owns 4,000 shares of Teasler stock. Four rights plus $34 cash are needed to buy one new share. The ex-rights date is in 30 days. a. What is the value of a right? b-1. How many of the new shares could Laila buy if she exercised all her rights? b-2. How much cash would this require?
Teasler Inc. currently trades at $40 and has 9 million shares outstanding with Net Income of $12 Million. The Board decides to use a rights offering to raise new capital. Each shareholder will receive one right for each share. Laila Sims currently owns 4,000 shares of Teasler stock. Four rights plus $34 cash are needed to buy one new share. The ex-rights date is in 30 days. a. What is the value of a right? b-1. How many of the new shares could Laila buy if she exercised all her rights? b-2. How much cash would this require?
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 12P
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Transcribed Image Text:Teasler Inc. currently trades at $40 and has 9 million shares outstanding with Net
Income of $12 Million. The Board decides to use a rights offering to raise new
capital. Each shareholder will receive one right for each share.
Laila Sims currently owns 4,000 shares of Teasler stock. Four rights plus $34 cash
are needed to buy one new share. The ex-rights date is in 30 days.
a. What is the value of a right?
b-1. How many of the new shares could Laila buy if she exercised all her rights?
b-2. How much cash would this require?
c. How many new shares is Teasler issuing and what are the proceeds?
d. If the price of Teasler shares price moves to $30 what is the value of the right (
Assume still rights-on)
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