Question: You are stockholder in a SmallTech Inc., a company that is planning to raise new equity. The stock is trading at $ 15 per share, and there are 1 million shares outstanding. The firm issues 500,000 rights to buy additional shares at $ 10 per share to its existing stockholders.
a. What is the expected stock price after the rights are exercised?
b . If the rights are traded, what is the price per right?
c. As a stockholder, would you be concerned about the dilution effect lowering your stock price? Why or why not?