Precise Machining is considering a rights offer.The company has determined that the ex-rights price would be $46.The current price is $53 per share,and there are 7 million shares outstanding.The rights offer would raise a total of $70 million.What is the subscription price?
A)$26.48
B)$27.06
C)$27.50
D)$28.18
E)$29.10

Question

Quizplus · Accepted Answer

Number of new shares = $70m/P_SN_Ex = 7m/($70m/P_S) = 0.1P_SP_X = $46 = [0.1P_S($53) + P_S]/(0.1P_S + 1); P_S = $27.06

Precise Machining Is Considering a Rights Offer