Final answer:
a) The new market value of the company can be calculated by multiplying the number of new shares offered by the price of each share and adding this value to the current market value of the existing shares. b) The number of rights associated with one of the new shares can be calculated by dividing the total number of rights issued in the rights offering by the number of new shares offered. c) The ex-rights price is the price at which the stock will trade after the rights offering is completed. d) The value of a right can be calculated by subtracting the ex-rights price from the subscription price (the price at which shareholders can buy the new shares) and dividing the result by the number of rights required to purchase one new share.
Step-by-step explanation:
a) The new market value of the company can be calculated by multiplying the number of new shares offered by the price of each share and adding this value to the current market value of the existing shares. In this case, the new market value would be:
New Market Value = (80,000 * $84) + (450,000 * $90)
b) The number of rights associated with one of the new shares can be calculated by dividing the total number of rights issued in the rights offering by the number of new shares offered. In this case, the number of rights associated with one new share would be:
Number of Rights per New Share = Total Number of Rights / Number of New Shares
c) The ex-rights price is the price at which the stock will trade after the rights offering is completed. It can be calculated by dividing the new market value by the total number of shares (existing shares + new shares). In this case, the ex-rights price would be:
Ex-Rights Price = New Market Value / (Existing Shares + New Shares)
d) The value of a right can be calculated by subtracting the ex-rights price from the subscription price (the price at which shareholders can buy the new shares) and dividing the result by the number of rights required to purchase one new share. In this case, the value of a right would be:
Value of a Right = (Subscription Price - Ex-Rights Price) / Number of Rights per New Share