In 2008 Pandora, Inc, makes a rights issue at a subscription price of

QUESTION

In 2008 Pandora, Inc, makes a rights issue at a subscription price of $5 a share. One new share can be purchased for every four shares held. Before the issue there were 10 million shares outstanding and the share price was $6.a. what is the total amount of new money raised?b. What is the expected st
Rights issue at a subscription price of $5 per share. One new share can be purchased for every four shares held. Before the issue there were 10,000,000 shares outstanding and the share price was $6 (a) What is the total amount of new money raised? Rights issue subscription price per share = $5 per share One new share can be purchased for every four shares held. Number of shares outstanding shares = 10,000,000 New shares purchased through rights issue = [10,000,000 * ] New shares purchased through rights issue = 2,500,000 Total amount of new money raised through rights issue =

2,500,000 * $5 Total amount of new money raised through rights issue = $12,500,000 (b) What is the expected stock price after the rights are issued? Total Stock value before issue = [10,000,000 * $6] Total Stock value before issue = $60,000,000 Expected stock value per share (after rights issue) = $60,000,000 / 2,500,000 Expected stock value per share (after rights issue) = $24 per share

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