Toady Inc. has 2 million shares outstanding selling at $70 a share. The Company intends to undertake a rights issue that allows 1 share to be purchased for every 5 shares currently held by shareholders for $40 each. If all shareholders take up their entitlement, which one of the following is true? The stock price will fall to $65. The number of shares outstanding will fall to 1.6 million. The firm will raise $13.33 million. The total value of the firm will equal $124 million.

Toady Inc. has 2 million shares outstanding selling at $70 a share. The Company intends to undertake a rights issue that allows 1 share to be purchased for every 5 shares currently held by shareholders for $40 each. If all shareholders take up their entitlement, which one of the following is true? The stock price will fall to $65. The number of shares outstanding will fall to 1.6 million. The firm will raise $13.33 million. The total value of the firm will equal $124 million.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 12P

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bartleby, a Learneo, Inc. business

		The stock price will fall to $65.
		The number of shares outstanding will fall to 1.6 million.
		The firm will raise $13.33 million.
		The total value of the firm will equal $124 million.