The Clifford Corporation has announced a rights offer to raise $30 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $48 per share, and there are 4.5 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b. If the subscription price is set at $40 per share, how many shares must be sold? How many rights will it take to buy one share? (Do not round intermediate calculations and round your rights needed answer to 2 decimal places, e.g., 32.16.) c. What is the ex-rights price? What is the value of a right? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) d. A shareholder with 2,000 shares before the offering has no desire (or money) to buy additional shares offered as rights. What is his portfolio value before and after the rights offer? (Do not round intermediate calculations and round your answers to nearest whole number, e.g., 32.) a. The maximum possible subscription price is a. The minimum possible subscription price b. Number of new shares b. Number of rights needed c. Ex-rights price c. Value of a right d. Portfolio value before rights d. Portfolio value after rights
The Clifford Corporation has announced a rights offer to raise $30 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $48 per share, and there are 4.5 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b. If the subscription price is set at $40 per share, how many shares must be sold? How many rights will it take to buy one share? (Do not round intermediate calculations and round your rights needed answer to 2 decimal places, e.g., 32.16.) c. What is the ex-rights price? What is the value of a right? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) d. A shareholder with 2,000 shares before the offering has no desire (or money) to buy additional shares offered as rights. What is his portfolio value before and after the rights offer? (Do not round intermediate calculations and round your answers to nearest whole number, e.g., 32.) a. The maximum possible subscription price is a. The minimum possible subscription price b. Number of new shares b. Number of rights needed c. Ex-rights price c. Value of a right d. Portfolio value before rights d. Portfolio value after rights
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation
Section: Chapter Questions
Problem 2P
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Transcribed Image Text:The Clifford Corporation has announced a rights offer to raise $30 million for a new
journal, the Journal of Financial Excess. This journal will review potential articles after the
author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells
for $48 per share, and there are 4.5 million shares outstanding.
a. What is the maximum possible subscription price? What is the minimum? (Leave no
cells blank - be certain to enter "0" wherever required.)
b. If the subscription price is set at $40 per share, how many shares must be sold? How
many rights will it take to buy one share? (Do not round intermediate calculations
and round your rights needed answer to 2 decimal places, e.g., 32.16.)
c. What is the ex-rights price? What is the value of a right? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
d. A shareholder with 2,000 shares before the offering has no desire (or money) to buy
additional shares offered as rights. What is his portfolio value before and after the
rights offer? (Do not round intermediate calculations and round your answers to
nearest whole number, e.g., 32.)
a. The maximum possible subscription price is
a. The minimum possible subscription price
b. Number of new shares
b. Number of rights needed
c. Ex-rights price
c. Value of a right
d. Portfolio value before rights
d. Portfolio value after rights
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