What is the maximum possible subscription price

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Reference no: EM131502859

Gourds Inc. has announced a rights offering to raise $30,000,000 to fund its CEO's acquisition ambitions. The stock currently sells for $48 per share and there are currently 3,900,000 shares outstanding.

a) What is the maximum possible subscription price?

b) If the subscription price is set at $43 per share, how many shares must be sold? And how many rights will it take to buy 1 share?

c) Assume all rights are exercised. What is the ex-rights price of the shares? What is the value of a right?

d) Imagine a shareholder with 1,000 shares before the offering and no desire to buy additional shares. Show how she is not harmed by the offering.

*Please show your work as best as possible including formulas,

Reference no: EM131502859

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