Gallagher rights and price of gallagher stock rises

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Reference no: EM131905872

Todd Winningham IV has $5,700 to invest. He has been looking at Gallagher Tennis Clubs Inc. common stock. Gallagher has issued a rights offering to its common stockholders. Six rights plus $64 cash will buy one new share. Gallagher’s stock is selling for $82 ex-rights.

a-1. How many rights could Todd buy with his $5,700? (Do not round intermediate calculations and round your answer to the nearest whole number.)

Number of rights

a-2. Alternatively, how many shares of stock could he buy with the same $5,700 at $82 per share? (Do not round intermediate calculations and round your answer to the nearest whole number.)

Number of shares

b. If Todd invests his $5,700 in Gallagher rights and the price of Gallagher stock rises to $90 per share ex-rights, what would his dollar profit on the rights be? (First compute profit per right.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

Dollar profit $

c. If Todd invests his $5,700 in Gallagher stock and the price of the stock rises to $90 per share ex-rights, what would his total dollar profit be? (Use the rounded number of shares from part a-2. Do not round any other intermediate calculations and round your answer to the nearest whole dollar.)

Total dollar profit $

d. If Todd invests his $5,700 in Gallagher rights and the price of Gallagher’s stock falls to $56 per share, ex-rights, what would his dollar profit on the rights be? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole dollar.)

Dollar profit/loss $

e. If Todd invests his $5,700 in Gallagher stock and the price of Gallagher’s stock falls to $56 per share ex-rights, what would be his total dollar profit? (Negative amount should be indicated by a minus sign. Use the rounded number of shares from part a-2. Do not round any other intermediate calculations and round your answer to the nearest whole dollar.)

Dollar profit/loss on the stock $

Reference no: EM131905872

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