Ritzer Company Has 1,000,000 Shares of Stock Outstanding That Sell $\begin{array}{lccc}\text { New Shs } \quad\text { No. of Rights }\quad\text { Value }\quad \text { Ending Frice } \\\end{array}$

Short Answer

Ritzer Company has 1,000,000 shares of stock outstanding that sell for $90 per share.The company wants to sell stock via a rights offering.The new issue will be used to raise $8 million of new equity,and existing shareholders will receive one right per share held.Theoretically,if the subscription price is $80, (1)how many new shares must be sold, (2)how many rights per share of new stock will be required, (3)what will the value of each right be,and (4)what will the stock price be after the rights offering has been completed? $\begin{array}{lccc}\text { New Shs } \quad\text { No. of Rights }\quad\text { Value }\quad \text { Ending Frice } \\\end{array}$
a. $\begin{array}{llll}100,000\quad \quad\quad\quad 8 \quad\quad\quad\quad \$ 1.38 \quad\quad \$ 88.62\end{array}$
b. $\begin{array}{llll}100,000 \quad\quad\quad\quad 9 \quad\quad\quad\quad \$ 1.05 \quad\quad \$ 88.95\end{array}$
c. $\begin{array}{llll}100,000 \quad\quad\quad\quad 10 \quad\quad\quad\quad \$ 0.91 \quad\quad \$ 89.09\end{array}$
d. $\begin{array}{llll}120,000\quad\quad\quad\quad 8 \quad\quad\quad\quad \$ 1.05 \quad\quad \$ 88.95\end{array}$
e. $\begin{array}{llll}120,000 \quad\quad\quad\quad 8 \quad\quad\quad\quad\$ 1.05 \quad\quad \$ 88.95\end{array}$