Q9 Suppose you own 500,000 shares of common stock in a firm with 40 million total...
Q9
Suppose you own 500,000 shares of common stock in a firm with 40 million total shares outstanding. The firm announces a plan to sell an additional 5 million shares through a rights offering. The market value of the stock is $32.5 before the rights offering and the new shares are being offered to existing shareholders at a $2.50 discount. If you exercise your preemptive rights, how many of the new shares can you purchase?
Homework Answers
| percentage of existing holding (500,000 / 40,000,000)*100 | 1.25% |
| number of new shares sold | 5 million |
| new shares that can be purchased (5 milllion*1.25%) | 62,500 shares |
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Q9
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