Solved: Cash offer of new stock below the market price, Accounting Basics

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Cash offer of new stock below the market price

Task: Construct a simple example to show the following:

1. Existing shareholders are made worse off when a company makes a cash offer of new stock below the market price.

2. Existing shareholders are not made worse off when a company makes a rights issue of new stock below the market price even if the new stockholders do not wish to take up their rights.

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Accounting Basics: Cash offer of new stock below the market price

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