New stock issue, subscription price and value of one right
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Gold Mining Corporation is seeking to raise $10,000,000 through a rights offering. The company presently has 1,000,000 shares of common stock outstanding at a current market price of $25 per share.
(a) How many new shares must be sold via the rights offering if the subscription price of the new stock is $20 per share?
(b) How many new shares could a stockholder owing 100 shares purchase?
(c) What is the value of one right?
(d) What will be the approximate price of the stock ex-rights?
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Solution Summary
The solution examines new stock issue, subscription price and value of one right for Gold Mining Corporation.
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A. How many new shares must be sold via the rights offering if the subscription price of the new stock is $20 per share?
No. of shares to be issued = Capital to be raised / subscription price of new stock = 10,000,000/20 =500,000 ...
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