CORPORATE FINANCE>CUSTOM<
11th Edition
ISBN: 9781308755465
Author: Ross
Publisher: MCG/CREATE
expand_more
expand_more
format_list_bulleted
Question
Chapter 20, Problem 15QP
Summary Introduction
To determine: The subscription price.
Rights Offer:
In rights offer, common stock is issued to the existing shareholders. Here, the shareholder has issued an option in which a certain number of shares can be bought at a specific price and at a specific duration.
Subscription Price:
The price, where the current shareholders are let to pay a share of stock is termed as subscription price. The subscription price is generally low than the prsentt market price.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Hoobastink Mfg. is considering a rights offer. The company has determined that the ex- rights price will be $61. The current price is $68 per share, and there are 10 million shares outstanding. The rights offer would raise a total of $60 million. What is the subscription price?
Kiser Mfg. is considering a rights offer. The company has determined that the ex- rights price will be $69. The current price is $75 per share, and there are 20 million shares outstanding. The rights offer would raise a total of $40 million. What is the subscription price? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)
Yonkers Inc. is issuing new common shares in a rights offer to raise $10 million for a new project. The subscription price for each new share is $20. The firm currently has two million common shares outstanding, each priced at $25 in the market. What is the price of each right?
Select one:
a. $1
b. $2
c. $5
d. $10
e. $15
Chapter 20 Solutions
CORPORATE FINANCE>CUSTOM<
Ch. 20 - Prob. 1CQCh. 20 - Debt versus Equity Flotation Costs Why arc the...Ch. 20 - Prob. 3CQCh. 20 - Prob. 4CQCh. 20 - Prob. 5CQCh. 20 - Prob. 6CQCh. 20 - Prob. 7CQCh. 20 - Prob. 8CQCh. 20 - Prob. 9CQCh. 20 - IPO Pricing The following material represents the...
Ch. 20 - Competitive and Negotiated Offers What are the...Ch. 20 - Seasoned Equity Offers What are the possible...Ch. 20 - Prob. 13CQCh. 20 - Prob. 14CQCh. 20 - Prob. 15CQCh. 20 - Rights Offerings Chanelle, Inc., is proposing a...Ch. 20 - Prob. 2QPCh. 20 - Prob. 3QPCh. 20 - Prob. 4QPCh. 20 - Calculating Flotation Costs The St. Anger...Ch. 20 - Prob. 6QPCh. 20 - Calculating Flotation Costs The Green Hills Co....Ch. 20 - Prob. 8QPCh. 20 - Stock Offerings The Newton Company has 50,000...Ch. 20 - Dilution Teardrop, Inc., wishes to expand its...Ch. 20 - Dilution The all-equity firm Metallica Heavy Metal...Ch. 20 - Prob. 12QPCh. 20 - Prob. 13QPCh. 20 - Prob. 14QPCh. 20 - Prob. 15QPCh. 20 - Prob. 16QPCh. 20 - Prob. 17QPCh. 20 - Prob. 18QPCh. 20 - Prob. 1MCCh. 20 - Prob. 2MCCh. 20 - Prob. 3MCCh. 20 - Prob. 4MC
Knowledge Booster
Similar questions
- The management of LTTP Corp. is preparing for issuing equity to fund a new project. Rights offeris used. The company has determined that the ex-rights price would be $53. The current price is $58per share, and there are 10 million shares outstanding. The rights offer would raise a total of $45million. What is the subscription price?arrow_forwardThe management of LTTP Corp. is preparing for issuing equity to fund a new project. Rights offeris used. The company has determined that the ex-rights price would be $53. The current price is $58per share, and there are 10 million shares outstanding. The rights offer would raise a total of $45million. What is the subscription price? can you handwrite it pleasearrow_forwardDisturbed Corporation needs to raise $59 million to fund a new project. The company will sell shares at a price of $24.10 in a general cash offer and the company's underwriters will charge a spread of 7.5 percent. The direct flotation costs associated with the issue are $825,000 and the indirect costs are $485,000. How many shares need to be sold?arrow_forward
- Wuttke Corp. wants to raise $4.8 million via a rights offering. The company currently has 580,000 shares of common stock outstanding that sell for $85 per share. Its underwriter has set a subscription price of $40 per share and will charge the company a spread of 6 percent. If you currently own 2,500 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your rights? Please answer fast I give you upvote.arrow_forwardHungHom Inc. has 250,000 shares outstanding at $60 per share. For expansion of its overseas plant facilities, the company has decided to raise $5,000,000 by a rights offering with a subscription price of $50. 2-1. How many new shares are offered to raise the required funds? Answer: Number of new shares = ____________ 2-2. How many rights are needed to buy a new share via rights offering? Answer: Number of rights needed = _________rights per share 2-3. What will the price per share be if all rights are exercised? Use two decimal points rounded up (e.g., 79.54). Answer: Price per share = $_____________ 2-4. Assuming everything else is constant, what is the value of the right? Use two decimal points rounded up (e.g., 79.54). Answer: Value of the right=_____________$arrow_forwardDavid's Watersports Firm is considering a public offering of common stock. Its investment banker has informed the company that the retail price will be $16.85 per share for 550,000 shares. The company will receive $15.40 per share and will incur $180,000 in registration, accounting, and printing fees. A. What is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value (at retail)? B. If the firm wanted to net $15.99 million from this issue, how many shares must be sold?arrow_forward
- Company AB has a market value of GH¢50 million. Company CD has a market value of GH¢200 million. YY has determined that if it combines resources with AB, will be worth GH¢25 million today. On this basis, CD makes an offer to buy AB. If CD makes a cash offer of GH¢65 million for all the shares of AB, what is the cost of this purchase to CD? Suppose CD has issued 100 of its shares to its shareholders and is considering issuing 30 shares to the shareholders of AB, what is the cost of the share offer?arrow_forwardRST Inc. wants to raise $30M in an IPO and chose Soldman Gachs to underwrite the offering. The two sides agreed that Soldman Gachs would sell 5M shares to the public and provide $30M in net proceeds to RST. The out of pocket expenses incurred by Soldman Gachs were $500,000. What profit or loss did Security Brokers incur if the issue were sold to the public at $8 / share? What about at $5.50 / share?arrow_forwardDo solve all three parts Suppose that your company wants to raise additional money via a right offering. Currently, the value of the company is $10,000,000 and the price per share is $100. The company wants to raise $1,000,000. (a) Suppose that your company wants to avoid a large drop in price after the rights offering. In particular, it wants the ex-rights price to be $95. What should be the subscription price? How many additional shares should the company issue? (b) Compute the value of the right. How many rights are required to buy one share? (c) Suppose now that the firm decides to hire an investment bank as an underwriter to facilitate the process. Suppose that the underwriter charges a 2% fee for each dollar raised in the rights offering. Redo part (a), assuming that the ex-rights price is still $95. How does your answer change if, on top of the 2% fee, the underwriter requires a fixed payment of $10,000?arrow_forward
- Gravity Company needs to raise $49.5 million to fund its expansion plans. The company will sell shares at a price of $28.30 in a general cash offer and the company's underwriters will charge a spread of 6 percent. How many shares need to be sold?arrow_forwardBellex Technik AG issues an IPO sold on a best-// basis. The company's investment bank demands a spread of 17 per cent of the offer price, which is set at €30 per share. Three million shares are issued. However, the bank was overly optimistic and eventually is able to sell the shares for only €28. What are the proceeds for the issuer and the underwriter?arrow_forwardBeetlejuice has 15 million shares outstanding with a current market price of $2 per share. Beetlejuice announces an investment in a project where the initial investment in year 0 is $5 million and the cash inflow for the next five years will be $3 million, after which the investment will generate no cash flows. Beetlejuice’s discount rate for this project is 8%. What is the dollar increase in Beetlejuice’s share price due to the undertaking this investment?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT