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The Timken Company has announced a rights offer to raise $25 million for a new journal, the Journal of Financial Excess.
. The Timken Company has announced a rights offer to raise $25 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a nonrefundable reviewing fee of $2,500 per page. The stock currently sells for $48 per share, and there are 2.6 million shares outstanding. The subscription price is set at $43 per share. What is the ex-rights price per share?
<answer> new shares = $25000000/$32 = 581395.349 shares which will be issued
Number of rights to buy a stock = number of existing stocks outstanding / 581395.349 = 4.472 rights needed to buy a stock
Suppose that one investor holds 4.472 stocks, then after exercising rights, he will have 5.472 shares. His wealth will be 4.472 X $48 (current stock price) + 1 X $43 = $257.656
Value of a stock after rights are exercised = $257.656 / 5.472 = $47.09
what i wanna ask is, on the first line of the answer, where did $32 come from?
