Grassland Inc wants to raise 214 million through a rights of

Grassland Inc. wants to raise $21.4 million through a rights offering so it can modernize its facilities. The subscription price for the offering is set at $12 a share. Currently, the company has 2.6 million shares of stock outstanding at a market price of $12.50 a share. Each shareholder will receive one right for each share of stock they own. How many rights will a shareholder need to purchase one new share of stock in this offering?

A. 1.46 rights

B. 1.52 rights

C. 1.55 rights

D. 1.60 rights

E. 1.67 rights

(Please show calculations)

Solution

Each shareholder will receive one right in this offering .

Value that can be raised from this offering : 2.6 million * 12 = 31.2 million

Number of rights shareholders need to purchase : 31.2 /21.4 = 1.4579 rights [rounded to 1.46]

correct option is \"A\"