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    Subscription price under rights issue

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    Hoobastink Mfg. is considering a rights offer. The company has determined that the ex-rights price will be $61. The current price is $68 per share, and there are 10 million shares outstanding. The rights offer would raise a total of $60 million. What is the subscription price?

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    Solution Preview

    Let P be the subscription price.
    First let us calculate the number of new shares that will be issued

    The number of new shares = the amount ...

    Solution Summary

    The solution explains how to calculate the subscription price in a rights issue.