Gourds Inc. has announced a rights offering to raise $30,000,000 to fund its CEO's acquisition ambitions. The stock currently sells for $48 per share and there are currently 3,900,000 shares outstanding.
a) What is the maximum possible subscription price?
b) If the subscription price is set at $43 per share, how many shares must be sold? And how many rights will it take to buy 1 share?
c) Assume all rights are exercised. What is the ex-rights price of the shares? What is the value of a right?
d) Imagine a shareholder with 1,000 shares before the offering and no desire to buy additional shares. Show how she is not harmed by the offering.