Question

Nougat corporation wants to raise $3.3 million via a rights offering. the company currently has 430,000 shares of common stock outstanding that sell for $35 per share. its underwriter has set a subscription price of $15 per share and will charge the company a spread of 6 percent. if you currently own 3,000 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your rights?

Answer 1

To calculate the amount of money you can get by selling your rights in the Nougat corporation rights offering, subtract the subscription price from the current market price and multiply by the number of shares you own. In this case, you can get $60,000 by selling your rights.

Step-by-step explanation:

To calculate the amount of money you can get by selling your rights, you need to understand the terms of the rights offering. In the given scenario, the subscription price is set at $15 per share, and the underwriter will charge a spread of 6 percent. The current price of the shares is $35 per share.

Since you own 3,000 shares and decide not to participate in the rights offering, you can sell your rights to someone else. The value of the rights can be calculated by taking the difference between the subscription price and the current market price, and then multiplying it by the number of shares you own.

The value of the rights per share would be $35 - $15 = $20. Multiply this by 3,000 shares to get $60,000. So, you can get $60,000 by selling your rights.