Question: Jensen Company plans to raise $10,000,000 in new equity by means of a rights offering with a subscription price of $80 per share. The stock currently sells for $100 per share and there are 1 million shares outstanding.
1. How many new shares will Jensen issue?
2. How many rights will be required to buy one share?
3. At what price will the stock sell when it goes "ex rights" if the total value of all stock increases by the amount of the new funds?
4. What is the theoretical value of one right?