You currently own 6 percent of the 3 million outstanding shares of Webster Mills. The company has just announced a rights offering with a subscription price of $60. One right will be issued for each share of outstanding stock. This offering will provide $27 million of new financing for the firm, ignoring all issue costs. Assume that all rights are exercised. What will be your new ownership position if you opted to sell your rights rather than exercise them personally?On October 10, the stockholders' equity of Sherman Systems appears as follows. Common stock-$10 par value, 86,000 shares authorized, issued, and outstanding $860,000 Paid-in capital in excess of par value, common stock 286,000 Retained earnings 976,000 Total stockholders' equity $2,122,000 Prepare journal entries to record the following transactions for Sherman Systems. a. Purchased 6,400 shares of its common stock at $39 per share on October 11. b. Sold 1,350 treasury shares on November 1 for $45 cash per share. c. Sold all remaining treasury shares on November 25 for $34 cash per share.
You currently own 6 percent of the 3 million outstanding shares of Webster Mills. The company has just announced a rights offering with a subscription price of $60. One right will be issued for each share of outstanding stock. This offering will provide $27 million of new financing for the firm, ignoring all issue costs. Assume that all rights are exercised. What will be your new ownership position if you opted to sell your rights rather than exercise them personally?On October 10, the stockholders' equity of Sherman Systems appears as follows. Common stock-$10 par value, 86,000 shares authorized, issued, and outstanding $860,000 Paid-in capital in excess of par value, common stock 286,000 Retained earnings 976,000 Total stockholders' equity $2,122,000 Prepare journal entries to record the following transactions for Sherman Systems. a. Purchased 6,400 shares of its common stock at $39 per share on October 11. b. Sold 1,350 treasury shares on November 1 for $45 cash per share. c. Sold all remaining treasury shares on November 25 for $34 cash per share.
Chapter20: Financing With Derivatives
Section: Chapter Questions
Problem 12P
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Transcribed Image Text:You currently own 6 percent of the 3 million outstanding shares of Webster Mills. The company has just
announced a rights offering with a subscription price of $60. One right will be issued for each share of
outstanding stock. This offering will provide $27 million of new financing for the firm, ignoring all issue
costs. Assume that all rights are exercised. What will be your new ownership position if you opted to
sell your rights rather than exercise them personally?On October 10, the stockholders' equity of
Sherman Systems appears as follows. Common stock-$10 par value, 86,000 shares authorized,
issued, and outstanding $860,000 Paid-in capital in excess of par value, common stock 286,000
Retained earnings 976,000 Total stockholders' equity $2,122,000 Prepare journal entries to record the
following transactions for Sherman Systems. a. Purchased 6,400 shares of its common stock at $39
per share on October 11. b. Sold 1,350 treasury shares on November 1 for $45 cash per share. c. Sold
all remaining treasury shares on November 25 for $34 cash per share.
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