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10. Hothouse Mfg. is considering a rights offer. The company has determined that the ex-rights price...

10. Hothouse Mfg. is considering a rights offer. The company has determined that the ex-rights price will be $61. The current price is $65 per share, and there are 11 million shares outstanding. The rights offer would raise a total of $64 million. What is the subscription price?

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Expert Solution

Number of new shares = $64m/Ps

Nex = 11m/($64m/Ps) = 0.17Ps

Px = $61 = [0.17Ps ($65) + Ps] / (0.17Ps +1 );

Ps = $36.31

ekkarill92 answered 2 years ago
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