Question

Tes, inc. currently has 700,000 shares of stock outstanding at a market price of $35 a share. The company wants to raise $3 million in a rights offering. The subscription price is $30 a share. One right will be granted for every share of outstanding stock. What is the value of one right?

Answer 1

The value of one right is $4.29.

Step-by-step explanation:

To calculate the value of one right, we need to determine how much the company will raise through the rights offering and how many new shares will be issued. In this case, Tes, Inc. wants to raise $3 million and have one right for every share of outstanding stock. With 700,000 shares outstanding, this means that 700,000 rights will be issued.

The value of one right is then calculated by dividing the amount raised ($3 million) by the total number of rights (700,000).