Question

Computer Graphics has announced a rights offering for its shareholders. Carol Stevens owns 2,700 shares of Computer Graphics stock. Four rights plus $67 cash are needed to buy one of the new shares. The stock is currently selling for $86 rights on a. What is the value of a right? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value per right b-1. How many of the new shares could Carol buy if she exercised all her rights? (Do not round intermediate calculations, Round your answer down to the nearest whole number.) Number of shares b-2. How much cash would this require? (Round down the number of shares to the nearest whole number and round your answer to the nearest whole dollar) Cash required

Answer 1

Solution - (a) NO of rights needed to buy one share (N) = 4 current Market Price of Right on (Mo) = $86 Subscription Price (s) = $67 Value per Right Mo-s N+1 $ 86 - $67 4 + 1 z $ 19 5 $3.8/ per share D-1 No. of shares Carol Stevens own a 2,700 has 2,700 rights and 4 rights are So, he needed to buy one new share.

Number 엑 new shares Carol could buy a z 2,700 4. 675 shares (B-2) Subscription Price = $67 675 NO: of new shares Corol could buy He would require cash ) 675 x $67 $ 45,225