Question

Western Markets has 150,000 shares outstanding with a market price per share of $15. Each share is entitled to one right. If the firm sets a rights offer as 5 rights plus $10 for each new share, what will be the ex-rights price per share

Answer 1

Answer: $8.50

Explanation:

                             Price          Outstanding     Value

Total  Shares    15      150,000.00   $2,250,000.00  

Right Price         2       150,000.00   $300,000.00  

Total  Shares and Value    300,000.00   $2,550,000.00  

Ex rights Price = $2,550,000/300,000 = $8.5