question archive A CFO of a company with a market capitalization of $1B
A CFO of a company with a market capitalization of $1B
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A CFO of a company with a market capitalization of $1B. The firm has 132 million shares outstanding, so the shares are trading at $10.68 per share. Each existing shareholder is sent one right for every share he or she owns. The CFO has not decided how many rights he will require to purchase a share of new stock. He will require either 2 rights to purchase one share at a price of $6.59 per share, or 5 rights to purchase two new shares at a price of $7.45 per share. How much money will the first approach raise?
NOTE: Answer in Millions. If your answer is 403.2799M, answer 403.28
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Money that can be raised = 66M * $6.59 = $434.94M
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Step-by-step explanation
Right shares issued = outstanding shares / # of rights required
*First approach*
132M / 2 = 66M
Money that can be raised = right shares issued * right issue price
Money that can be raised = 66M * $6.59 = $434.94M
