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72) S&S wants to raise $11.3 million through a rights offering with a subscription price of $15 a
share. The company has 1.24 million shares outstanding and a market price of $17.50 a share.
Each shareholder will receive one right for each share of stock owned. How many rights will be
needed to purchase one new share of stock in this offering?
A) 1.42
B) 1.75
C) 1.65
D) 1.82
E) 1.55
73) P&T wants to raise $2.8 million through a rights offering with a subscription price of $20 a
share. Currently, the company has 750,000 shares of stock outstanding at a market price of
$24.50 a share. One right will be granted for each share of stock outstanding. How many rights
are required to purchase one new share of stock in this offering?
A) 5.36
B) 6.02
C) 5.55
D) 6.56
E) 6.67
74) Miller Fruit wants to expand and needs $1.6 million to do so. Currently, the firm has 465,000
shares of stock outstanding at a market price per share of $32.50. The firm decided on a rights
offering with one right granted for each share of outstanding stock. The subscription price is $28
a share. How many rights are needed to purchase one new share of stock in this offering?
A) 8.14
B) 7.17
C) 8.22
D) 8.63
E) 9.45
75) Jeff's is granting one right for each share of stock outstanding for its new rights offering. The
new shares in this offering are priced at $16 plus four rights. The current market price of the
stock is $20 a share. What is the value of one right?
A) $1.05
B) $.80
C) $1.00
D) $1.50
E) $4.00
76) The stock of Cleaner Homes is currently selling for $15.40 a share. The new rights offering
grants one right for each share of stock outstanding. The new shares being offered are priced at
$13 plus three rights. What is the value of one right?
A) $.66
B) $.60
C) $.55
D) $.80
E) $.73
77) Mountain Products has decided to raise $6 million via a rights offering. The company will
issue one right for each share of stock outstanding. The subscription price is set at $20 per share.
The current market price of the stock is $25.20 and there are 1,500,000 shares currently
outstanding. What is the value of one right?
A) $.97
B) $.87
C) $.76
D) $.52
E) $1.04
78) The Timken Company has announced a rights offer to raise $5.1 million. The company's
stock currently sells for $34 per share, there are 1.207 million shares outstanding, and one right
will be granted for each outstanding share. The subscription price is set at $30 per share. What is
the ex-rights price per share?
A) $33.58
B) $33.51
C) $33.09
D) $32.87
E) $33.42
79) Southern Markets has announced a rights offer to raise $3,628,800. The company's stock
currently sells for $26.80 per share, there are 675,000 shares outstanding, and one right will be
granted for each outstanding share. The subscription price is set at $21 per share. What is the ex-
rights price per share?
A) $25.58
B) $25.62
C) $25.09
D) $24.87
E) $25.42
80) Atlas Corp. wants to raise $2.6 million via a rights offering. The company currently has
450,000 shares of common stock outstanding that sell for $26 per share. Its underwriter has set a
subscription price of $22 per share and will charge the company a spread of 7 percent. Assume
you currently own 1,200 shares of this stock and decide not to participate in the rights offering.
How much money should you receive for selling all of your rights?
A) $911
B) $1,302
C) $799
D) $1,095
E) $1,057
81) The Shoe Co. has determined that as a result of its rights offering, its share price fell from a
rights-on price of $38.50 to an ex-rights price of $37.62 per share. The rights offer was for $8.05
million with a per-share subscription price of $35. How many shares of stock were outstanding
before the offering?
A) 705,811
B) 703,230
C) 636,250
D) 684,773
E) 672,500
82) You currently own 11 percent of the 2.8 million outstanding shares of Webster Mills. The
company has just announced a $3.2 million rights offering with a subscription price of $25 per
share with one right issued for each share of stock. Assume that all rights are exercised. What
will be your new ownership position if you opt to sell your rights rather than exercise them?
A) 10.52 percent
B) 10.63 percent
C) 10.56 percent
D) 11.00 percent
E) 10.48 percent
83) Jen owns 7,500 of the 480,000 shares of TC Inc. The company has just announced a rights
offering whereby 75,000 shares are being offered at a subscription price of $12 a share. The
current stock price is $16 a share. Assume she sells her rights and that all rights are exercised.
What percentage of the firm will she own after the rights offering?
A) 1.35 percent
B) .75 percent
C) .86 percent
D) 1.27 percent
E) 1.00 percent
84) Winston's has 12,500 shares outstanding with a market value of $288,625. The company is
considering a project with a net present value of $5,300 that would require the purchase of
$69,000 of fixed assets. The project would be financed through the sale of equity shares. The
price-earnings ratio of the project equals that of the existing firm. What will the new market
value per share be after the project is implemented?
A) $23.51
B) $22.72
C) $23.80
D) $23.43
E) $24.10
85) JL Enterprises has 90,000 shares of stock outstanding with a book value of $1,343,000 and a
market value of $1,560,000. The firm is considering a project that requires the purchase of
$189,000 of fixed assets and has a net present value of $7,500. The project would be all-equity
financed through the sale of shares. What will the new book value per share be after the project
is implemented?
A) $15.18
B) $14.56
C) $14.23
D) $15.60
E) $15.08
86) Rhodes Trucking is considering investing in a new $3.7 million project that will increase net
income by 2.7 percent. This project will be completely funded by issuing new equity shares.
Currently, the firm has 647,400 shares of stock outstanding with a market price of $41 per share.
The current earnings per share are $3.02. What will the earnings per share be if the project is
implemented?
A) $3.10
B) $3.06
C) $2.72
D) $2.83
E) $2.99
87) You own 8,000 shares, or 5 percent, of Printers Ink stock. Your shares are valued at
$279,280. By what percentage will the total value of your investment change if the company
sells an additional 7,500 shares of stock at $33.50 a share and you do not buy any?
A) − .13 percent
B) −.21 percent
C) −.18 percent
D) −.03 percent
E) −.26 percent
88) Kurt currently owns 4.2 percent of NT Co. The company has a total of 685,000 shares
outstanding with a current market price of $19.20 a share. At present, the firm is offering an
additional 15,000 shares at a price of $18 a share. Kurt decides not to participate in this offering.
What will his ownership position be after the offering is completed?
A) 4.06 percent
B) 4.11 percent
C) 4.19 percent
D) 4.14 percent
E) 4.26 percent
89) Mountain Homes is considering an expansion costing $5.7 million that will increase net
income by $452,000. The company currently has 2.3 million shares outstanding and no debt. The
stock sells for $38 per share and the book value per share is $27. The current net income is $1.02
million. Assume the firm issues new equity to fund this expansion while maintaining a constant
price-earnings ratio. What will be the EPS after the new equity issue?
A) $.60
B) $.52
C) $.44
D) $.67
E) $.55
90) MHM wants to diversify its operations. The stock price is $22 a share with 225,000 shares
outstanding. Total assets are $7.2 million, total liabilities are $3.8 million, and net income is
$425,000. The company is considering an investment that has the same PE ratio as the current
company. The cost of the investment is $360,000 which will be financed with a new equity issue.
What would the ROE on the investment have to be if we wanted the stock price to remain
constant?
A) 9.28 percent
B) 11.41 percent
C) 7.63 percent
D) 8.59 percent
E) 10.03 percent
