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How may of the new shares can you purchase

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Suppose you own 100K shares of common stock in a firm with 5 Million total shares outstanding. The firm announces a plan to sell an additional 1 million shares through a rights offering. The market value of the stock is £15 before the rights offering and new share are being offered to existing share holders at a £5 discount.

If you exercise your preemptive rights, how may of the new shares can you purchase?

What is the market value of the stock after rights offering?

What is your total investment in the firm after the rights offering? How is your investment split between original shares and new shares?

If you decide not to exercise your preemptive rights, what is your investment in the firm after the rights offering? How is your investment split between your old shares and rights?

Reference no: EM132433945

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