What is the ex-rights price

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Finz is a financial institution that trades on the Toronto Stock Exchange. It is thinking of making a rights issue to raise $400 million, with a subscription price of $25 per share. The current price of its stock is $35 per share;
and Finz has 80 million shares outstanding.

1. Assume that only 85 percent of the rights are exercised. What is the ex-rights price?

2.Suppose that the firm anticipates that only 95 percent of the rights issued will be exercised and adjusts the number of shares that it announces will be made available for sale at the subscription price so that the issue will succeed in raising $400 million. How many shares will Finz announce for sale? What will be the ex-rights price in this case?

Reference no: EM13686171

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