Question

Prahm Corp. wants to raise $5.2 million via a rights offering. The company currently has 580,000 shares of common stock outstanding that sell for $53 per share. Its underwriter has set a subscription price of $28 per share and will charge the company a spread of 5 percent.

If you currently own 6,000 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 answer to 2 decimal places, e.g., 32.16.)

Answer 1

Given,

Amount to raise = $5.2 million or $5200000

Shares outstanding = 580000 shares

share price = $53

Subscription price = $28

Spread = 5% or 0.05

Stock holdings = 6000 shares

Solution :-