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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 $55 to $51.00 ($55 is the rights-on price; $51.00 is the ex-rights price, also known as the when-issued price). The company is seeking $23 million in additional funds with a per-share subscription price equal to $40.
How many shares are there currently, before the offering? (Assume that the increment to the market value of the equity equals the gross proceeds from the offering.) (Do not round intermediate calculations and round your final answer to nearest whole number, e.g., 32.)
Number of old shares
What kinds of conflicts can arise because of this goal? Please explain.
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