The Clifford Corporation has announced a rights offer to raise $36 million for a
ID: 2767372 • Letter: T
Question
The Clifford Corporation has announced a rights offer to raise $36 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $36 per share, and there are 1.8 million shares outstanding.
What is the maximum possible subscription price? What is the minimum? (Leave no cells blank - be certain to enter "0" wherever required.)
If the subscription price is set at $32 per share, how many shares must be sold? How many rights will it take to buy one share? (Do not round intermediate calculations. Round your rights needed answer to 2 decimal places, e.g., 32.16.)
What is the ex-rights price? What is the value of a right? (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16.)
A shareholder with 1,000 shares before the offering has no desire (or money) to buy additional shares offered as rights. What is his portfolio value before and after the rights offer? (Do not round intermediate calculations and round your final answers to nearest whole number, e.g., 32.)
The Clifford Corporation has announced a rights offer to raise $36 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $5,000 per page. The stock currently sells for $36 per share, and there are 1.8 million shares outstanding.
Explanation / Answer
The maximum possible subscription price is 36 The minimum price is anything greater than > 0 If the subscription price is set at $32 per share, how many shares must be sold? Amount to be Raised 36000000 how many shares must be sold 36,000,000/32 1125000 Number of rights needed 1800000/1125000 1.60 Portfolio value before rights 1000*36 36000 Portfolio value after rights 1000*34.46+1000*1.54 36000 Ex-rights price =+(1800000*36+36000000)/(1800000+1125000) 34.46 Value of a right =36-34.46 1.54