ABC Corp has decided to do a rights offering. It will issue 1 right for each share. The company currently has 10,000,000 shares outstanding. Therefore, there will be 10,000,000 rights. The stock price today is $50 per share. The company wishes to raise $100,000,000. The companyâs net income is $10,000,000. The company does not want earnings per share (EPS) to decline by more than 20%. What is the minimum subscription price that the company must set in the rights issue? How many rights will it take to buy 1 share at this minimum subscription price, and what is the value of one right at this minimum subscription price?
ABC Corp has decided to do a rights offering. It will issue 1 right for each share. The company currently has 10,000,000 shares outstanding. Therefore, there will be 10,000,000 rights. The stock price today is $50 per share. The company wishes to raise $100,000,000. The companyâs net income is $10,000,000. The company does not want earnings per share (EPS) to decline by more than 20%. What is the minimum subscription price that the company must set in the rights issue? How many rights will it take to buy 1 share at this minimum subscription price, and what is the value of one right at this minimum subscription price?
Related questions
| Roth Corp. wants to raise $4.6 million via a rights offering. The company currently has 560,000 shares of common stock outstanding that sell for $70 per share. Its underwriter has set a subscription price of $40 per share and will charge the company a spread of 2 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? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Subscription price | $ |
