Market value of equity equals gross proceeds from offering

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Reference no: EM13721485

Red Shoe Co. has concluded that additional equity financing will be needed to expand operations and that the needed funds will be best obtained through a rights offering. It has correctly determined that as a result of the rights offering, the share price will fall from $80 to $60 ($80 is the rights-on price; $60 is the ex-rights price, also known as the when-issued price). The company is seeking $13 million in additional funds with a per-share subscription price equal to $40.

Currently there are shares, __________ before the offering. (Assume that the increment to the market value of the equity equals the gross proceeds from the offering.)

Reference no: EM13721485

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