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?

Solutions

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

Next > < Previous

Related Solutions

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

Moullierat Mfg. is considering a rights offer. The company has determined that the ex-rights price will be $98. The current price is $106 per share, and there are 30 million shares outstanding. The rights offer would raise a total of $50 million. What is the subscription price?

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

Bell Hill Mfg. is considering a rights offer. The company has determined that the ex-rights price would be $78. The current price is $100 per share, and there are 25 million shares outstanding. The rights offer would raise a total of $50 million. What is the subscription price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Subscription price $

Mitsi Inventory Systems, Inc., has announced a rights offer. The company has announced that it will...

Mitsi Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take three rights to buy a new share in the offering at a subscription price of $61. At the close of business the day before the ex-rights day, the company’s stock sells for $85 per share. The next morning, you notice that the stock sells for $70 per share and the rights sell for $2 each. What price should the stock sell for ex-rights?...

Knight Inventory Systems, Inc., has announced a rights offer. The company has announced that it will...

Knight Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take three rights to buy a new share in the offering at a subscription price of $61. At the close of business the day before the ex-rights day, the company’s stock sells for $85 per share. The next morning, you notice that the stock sells for $70 per share and the rights sell for $2 each. What is the value of the stock ex-rights?...

Mitsi Inventory Systems, Inc., has announced a rights offer. The company has announced that it will...

Mitsi Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take two rights to buy a new share in the offering at a subscription price of $60. At the close of business the day before the ex-rights day, the company’s stock sells for $90 per share. The next morning, you notice that the stock sells for $70 per share and the rights sell for $3 each. What price should the stock sell for ex-rights?...

Myer Holdings Limited has a share price of $2.82. The company has made a renounceable rights...

Myer Holdings Limited has a share price of $2.82. The company has made a renounceable rights issue offer to shareholders. The offer is a three-for-ten pro-rata issue of ordinary shares at $2.60 per share. What is the theoretical ex-rights share price of the firm? What is the value of the right? Explain the effect of the offer being renounceable. Explain why an actual ex-rights price of a share may at times differ from the calculated theoretical price.

The Clifford Corporation has announced a rights offer to raise $20 million for a new journal,...

The Clifford Corporation has announced a rights offer to raise $20 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $4,000 per page. The stock currently sells for $40 per share, and there are 1.5 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b. If...

The Clifford Corporation has announced a rights offer to raise $21 million for a new journal,...

The Clifford Corporation has announced a rights offer to raise $21 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $69 per share, and there are 1.4 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b. If...

The Clifford Corporation has announced a rights offer to raise $36 million for a new journal,...

The Clifford Corporation has announced a rights offer to raise $36 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $36 per share, and there are 1.8 million shares outstanding. ch15.2 a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b....

The Clifford Corporation has announced a rights offer to raise $15 million for a new journal,...

The Clifford Corporation has announced a rights offer to raise $15 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $3,000 per page. The stock currently sells for $30 per share, and there are 1.8 million shares outstanding. a. What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.) b. If...

Subjects