>> Business Economics
Company A has announced a rights offer to raise $40 million for a new journal. The journal will review articles after the author pays a non-refundable reviewing fee of $5000 per page. The stock currently sells for $53 per share and there are 4.1 million shares outstanding.
a) Illustrate what is the maximum and minimum subscription price?
b.) If the subscription price is set at $48 per share how many shares must be sold and how many rights will it take to buy one share?
c.) What is the ex-rights price? What is the value of the right?
d.) Show how a shareholder with 1000 shares before the offering with no desire to purchase additional shares is not harmed by the rights offer.