A CFO of a company with a market capitalization of $1B. The firmhas 131 million...

A CFO of a company with a market capitalization of $1B. The firm has 131 million shares outstanding, so the shares are trading at $11.42 per share. Each existing shareholder is sent one right for every share he or she owns. The CFO has not decided how many rights he will require to purchase a share of new stock. He will require either 2 rights to purchase one share at a price of $6.15 per share, or 4 rights to purchase two new shares at a price of $7.08 per share. How much money will the first approach raise?

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Expert Solution

Money Can be raised = Right Shares issued * Right Issue Price

Right shares issued = SHares outstanding / No. of Rights required

= 131 M / 2

= 65.5 M

Money Can be raised = Right Shares issued * Right Issue Price

= 65.5 M * $ 6.15

= $ 402.825 M

jeff jeffy answered 2 years ago

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