You currently own 8 percent of the 3.5 million outstanding shares of Webster Mills. The
company has just announced a rights offering with a subscription price of $28. One
right will be issued for each share of outstanding stock. This offering will provided $9
million of new financing for the firm, ignoring all issue costs. Assume that all rights are
exercised. What will be your new ownership position if you opted to sell your rights
rather than exercise them personally?
A. 7.33 percent
B. 7.46 percent
C. 7.87 percent
D. 8.00 percent
E. 8.21 percent
Suzie is the controller of The Price Rite Company. She has been granted to the right to
buy 1,000 shares of her employer's stock at $25 a share anytime within the next three
years. Which one of the following has Suzie been granted?
A. employee stock option
B. company bonus option
C. employee grant
D. employee exercise option
E. company benefits option
Suppose your firm produces breakfast cereal and needs 65,000 bushels of corn in
December for an upcoming promotion. You would like to lock in your costs today
because you are concerned that corn prices might go up between now and December.
To hedge your risk exposure, you could purchase corn futures contracts today
effectively locking in a total settlement price of _____, based on the closing price
shown in the table below.
Corn - 5,000 bu., U.S. cents per bu.