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STatiana [176]
3 years ago
5

The Timken Company has announced a rights offer to raise $5.1 million. The company's stock currently sells for $34 per share, th

ere are 1.207 million shares outstanding, and one right will be granted for each outstanding share. The subscription price is set at $30 per share. What is the ex-rights price per share?
Business
1 answer:
omeli [17]3 years ago
8 0

Answer:

Right price =$33.50

Explanation:

<em>The theoretical ex-right price is the weighted average price at which shares are expected to settle after a right-issue,</em>

<em>It is the weighted average price of value of shares of the before-right price and the right price</em>

Ex-rights price

=(Before-right value of shares + Proceed from rights )/Total number of shares after rights issue

Number of rights issue units = amount to be raised /Right price per share

= $5.1 m/$30 = 170,000 units

Before - rights value = 1,207,000 × $34 = 41,038,000

Proceed from rights = 170,000 × $30 = 5,100,000

The ex-right price = (41,038,000 + 5,100,00)/(1,207,000 +170,000) units

Right price =$33.50

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