Answer: a. $22,725,000
b. 16.00 rights per new share
c. $53.47 per share
d. $0.53 per share
Explanation:
(a)-New Market Value
New Market Value = [Number of shares outstanding x Price per share] + [New shares issued x Price per share]
= [400,000 shares x $54 per share] + [25,000 shares x $45 per share]
= $21,600,000 + $1,125,000
= $22,725,000
(b)-Number of rights needed
Number of rights needed = Current number of shares outstanding / New shares issued
= 400,000 shares / 25,000 shares
= 16.00 rights per new share
(c)-Ex-rights price
Ex-rights price = New Market Value / Total number of shares outstanding
= $22,725,000 / [400,000 shares + 25,000 shares]
= $22,725,000 / 425,000 shares
= $53.47 per share
(d)-Value of a right
Value of a right = Current market price per share - Ex-rights price
= $54.00 per share - $53.47 per share
= $0.53 per share
