Digger Mining Inc. needs to raise $1.2 bil to finance the development of its new copper...
Digger Mining Inc. needs to raise $1.2 bil to finance the development of its new copper mine which it plans to obtain via a rights offering. Existing shareholders were offered the right to buy 3 new shares of Digger for every 20 shares held. The new shares were priced at $13.93 per share – about 44% below Digger’s preannouncement price of $24.73. Assume you owned 20 shares of Digger prior to the rights announcement. (PLEASE TYPE ANSWERS)
What is the value of your holdings prior to the announcement?
What is the additional outlay to buy the 3 new shares?
If you exercise the rights offer, what would be your total investment in Digger afterwards?
What would be the expected new price of Digger Mining post rights offering?
How much is the right to buy each new share worth?
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Digger Mining Inc. needs to raise $1.2 bil to finance the
development of its new copper...
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ambitious growth plans. The Acme CFO is wary of the risk of high
debt issuance, and will issue new shares through
a rights offering for additional equity capital of $1,500,000.
Question 1
(a) Calculate the current number of shares outstanding and the
number of shares to be issued.
(b) Calculate the theoretical ex-rights share price if all are
exercised.
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