1. Why are business people fascinated by the central issue behind the study of leverage, that is whether leverage influences stock price and whether there's an optimal structure? (Hint: Think in terms of management's goals and of acquisitions.)
2. Prahm Corp. wants to raise $4.1 million via a rights offering. The company currently has 510,000 shares of common stock outstanding that sell for $40 per share. Its underwriter has set a subscription price of $30 per share and will charge the company a spread of 2 percent.
If you currently own 6,000 shares of stock in the company and decide not to participate in the rights offering, how much money can you get by selling your rights? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Your proceeds from sale of rights $