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A shareholder currently owns 500 shares of Yesss, Co. Each share is currently priced at $15....

A shareholder currently owns 500 shares of Yesss, Co. Each share is currently priced at $15. The company has just released a rights offering at $12 plus 4 rights. What is the value of one right?

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Expert Solution

The right issue ratio of shares = 1 share for every four shares held

Current price of share = $ 15

Market value of 4 shares held @ 15 per share = 60

Amount received from right = 12

Total amount = 72

Total shares = 5

Average paid up value = 72/5 = 14.40

Market price per share = 15

Value of right = Market price per share - Average paid up value

= 15 - 14.40

= 0.60

jeff jeffy answered 2 years ago
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