[LO4] Red Shoe Co. has concluded that 3. Rights additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. It has correctly determined that as a result of the rights offering, the share price will fall from $49 to $47.60 ($49 is the rights-on price; $47.60 is the ex- rights price, also known as the when-issued price). The company is seeking $16.5 million in additional funds with a per-share subscription price equal to $34. How many shares are there currently, before the offering? (Assume that the increment to the market value of the equity equals the gros proceeds from the offering.)
[LO4] Red Shoe Co. has concluded that 3. Rights additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. It has correctly determined that as a result of the rights offering, the share price will fall from $49 to $47.60 ($49 is the rights-on price; $47.60 is the ex- rights price, also known as the when-issued price). The company is seeking $16.5 million in additional funds with a per-share subscription price equal to $34. How many shares are there currently, before the offering? (Assume that the increment to the market value of the equity equals the gros proceeds from the offering.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![3. Rights [LO4] Red Shoe Co. has concluded that
additional equity financing will be needed to expand
operations and that the needed funds will be best obtained
through a rights offering. It has correctly determined that as
a result of the rights offering, the share price will fall from
$49 to $47.60 ($49 is the rights-on price; $47.60 is the ex-
rights price, also known as the when-issued price). The
company is seeking $16.5 million in additional funds with a
per-share subscription price equal to $34. How many shares
are there currently, before the offering? (Assume that the
increment to the market value of the equity equals the gross
proceeds from the offering.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa67834ee-0fdf-4424-b804-68a4c92cb763%2Fcfa163fb-3664-4f35-9d1b-be01ae1db4ff%2Fty56tum_processed.png&w=3840&q=75)
Transcribed Image Text:3. Rights [LO4] Red Shoe Co. has concluded that
additional equity financing will be needed to expand
operations and that the needed funds will be best obtained
through a rights offering. It has correctly determined that as
a result of the rights offering, the share price will fall from
$49 to $47.60 ($49 is the rights-on price; $47.60 is the ex-
rights price, also known as the when-issued price). The
company is seeking $16.5 million in additional funds with a
per-share subscription price equal to $34. How many shares
are there currently, before the offering? (Assume that the
increment to the market value of the equity equals the gross
proceeds from the offering.)
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