Chapter 15, Problem 1QP

a)

Summary Introduction

To find: The company’s new market value.

Introduction:

The present or the newly quoted price for the market traded securities is the new market value. The new market value is mostly referred to as the asset price.

b)

Summary Introduction

To find: The number of rights that are associated with one of the shares.

Introduction:

The public issue of securities, in which the securities are generally at an initial stage, offered to the owners or the existing shareholders of the company is a right offer. In the rights offering, every shareholder of the company gets one right for each share that the rights offer owns.

c)

Summary Introduction

To find: The price of the ex-rights.

Introduction:

The shares of the traded stock that no longer have the rights attached to it because they might have expired, been exercised, or transferred to another investor is an ex-right shares.

d)

Summary Introduction

To find: The value of a right

Introduction:

The mathematically computed value of the subscription right after the announcements of the offering and before the expiration of the rights is the value of rights.

e)

Summary Introduction

To find: The reason for the company to have a rights offering instead of a general cash offer

Introduction:

The cash offer is a type of public issue that makes the availability of the shares to the general public in an initial public offering.