208k views
4 votes
Again, Inc., is proposing a rights offering. Presently, there are 425,000 shares outstanding at $65 each. There will be 90,000 new shares offered at $57 each.

a. What is the new market value of the company?
b. How many rights are associated with one of the new shares?
c. What is the ex-rights price?
d. What is the value of a right?
e. Why might a company have a rights offering rather than a general cash offer?

User Kkost
by
6.8k points

1 Answer

5 votes

Final answer:

Investors 1 and 2 of the Darkroom Windowshade Company, with 20,000 and 18,000 shares respectively, need to collaborate with investor 3, who owns 15,000 shares, to form a majority and change the company's top management. Without the support of investor 3, they cannot be certain of controlling the company's decisions.

Step-by-step explanation:

Company Shareholders and Voting Power

When it comes to determining the number of investors required to change a company's top management, you need a simple majority of the shares voted. In the case of the Darkroom Windowshade Company, there are 100,000 shares outstanding. The minimum number of investors needed would be those who collectively hold over 50,000 shares. Investors 1 and 2 together have 38,000 shares (20,000 + 18,000). If they agree to vote together, they would still need additional shareholders to join them to reach a majority.

To secure control and always get their way in how the company is run, investors 1 and 2 would need the support of investor 3, who has 15,000 shares, bringing their total to 53,000 shares. With this coalition, they would achieve a majority and could influence company decisions significantly. However, without investor 3, they would not have enough voting power to be certain of always getting their way.

User Redge
by
7.4k points