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CHPT 15

The document provides a sample problem from a corporate finance textbook. The problem asks students to calculate values related to a rights offering by a mining company. It provides information on current shares outstanding, new shares being offered, and asks students to calculate the new market value, rights per share, ex-rights price, and value of a right.

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26 views3 pages

CHPT 15

The document provides a sample problem from a corporate finance textbook. The problem asks students to calculate values related to a rights offering by a mining company. It provides information on current shares outstanding, new shares being offered, and asks students to calculate the new market value, rights per share, ex-rights price, and value of a right.

Uploaded by

Daniel Balcha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Main Menu

Financial Analysis Spreadsheet Templates


MAIN MENU -- CHAPTER 15

Problem 15-1

Fundamentals of Corporate Finance by Ross, Westerfield, and Jordan -- Fifth Edition


Copyright © 2000 Irwin/McGraw-Hill and KMT Software, Inc. (www.kmt.com)

File: 766207410.xls Copyright © 1997 Richard D. Irwin, Inc. Printed: 06/21/2024


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Edition
om)

File: 766207410.xls Copyright © 1997 Richard D. Irwin, Inc. Printed: 06/21/2024


Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan -- Fifth Edition

Problem 15-1 Objective


Calculate the value of stock rights.

Student Name:
Course Name:
Student ID:
Course Number:

STET Mining Co. is proposing a rights offering. Presently there are 250,000 shares outstanding at $60
each. There will be 50,000 new shares offered at $40 each.

a. What is the new market value of the company?

b. How many rights are associated with one of the new shares?

c. What is the ex-rights price?

d. What is the value of a right?

e. Why might a company have a rights offering rather than a general cash offer?

Solution
Instructions
Enter formulas to calculate values.

Shares Price
Currently outstanding 250,000 $60
New shares 50,000 $40

a. What is the new market value of the company?

New market value FORMULA

b. How many rights are associated with one of the new shares?

Number of rights needed FORMULA per new share

c. What is the ex-rights price?

Ex-rights price FORMULA

d. What is the value of a right?

Value of a right FORMULA

e. Why might a company have a rights offering rather than a general cash offer?

File: 766207410.xls Copyright © 1997 Richard D. Irwin, Inc. Printed: 06/21/2024

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