Determine the amount that the market price of companys stock

Assignment Help Financial Management

Reference no: EM13926647

The Oil City Company plans to sell an additional 1 million shares of common stock through a rights offering. The company currently has 12 million shares outstanding. Each shareholder will receive one right for each share currently held. Therefore, each right will enable shareholders to purchase 0.0833 shares. Oil City's common stock is currently selling for $30 per share, and the subscription price of the rights will be
$25 per share.

a. Calculate the formula value of the right for both the rights-on and ex-rights cases.

b. Determine the amount that the market price of the company's stock is expected to drop on the ex-rights date, assuming that all other things are equal.

c. If the market price of Oil City's common stock increases to $40 per share, what is the formula value of the rights (rights-on case)?

Reference no: EM13926647

Questions Cloud

Array without requiring reallocation : Implementation of Dynamic Array, Stack, and Bag First, complete the Worksheets 14 (Dynamic Array), 15 (Dynamic Array Amortized Execution Time Analysis), 16 (Dynamic Array Stack), and 21 (Dynamic Array Bag). These worksheets will get you started on..

Managing an international company and a domestic company : What are the differences between managing an international company and managing a domestic company? What functions of management are different in an international company as compared to a company in the US?

Explain the historical subject addressed in selected song : Identify and explain the historical subject addressed in the song. Explain how the song portrays the historical subject referenced in the song: Is the song critical or praiseworthy? Does it give a positive or negative impression

Corporate ethical breaches in recent times : Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior. Provide support for your answer.

Determine the amount that the market price of companys stock : Determine the amount that the market price of the company's stock is expected to drop on the ex-rights date, assuming that all other things are equal.

Discuss characteristics of emotional/behavioral disabilities : Read Emotional disturbance. Define and discuss the characteristics of emotional/behavioral disabilities (EBD). Next, explain the educational implications and how IDEA plays a role in ensuring students are given the appropriate support in the class..

Opportunity cost of producing gloves and hats : a. What is each country's opportunity cost of producing gloves and hats? b. If the countries could, should they trade? Provide one (1) supporting fact to support your position.

Reported for patent amortization expense : ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of ten years. On January 1, 2010, ELO spent $22,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life..

Able to predict the outcome of flipping a coin : A person claims to be able to predict the outcome of flipping a coin. This person is correct 16/25 times. Compute the 95% confidence interval on the proportion of times this person can predict coin flips correctly. What conclusion can you draw abo..

User Account

All Pages