BÀI TẬP CHAPTER 20

Họ và tên MSSV % Đóng góp

Tạ Thị Thanh Dung 31221025211 100%

Phạm Hữu Khánh Huyền 31221025133 100%

Nguyễn Lâm Huyền Trân 31221026171 100%

Nguyễn Xuân Khánh 31221022180 100%

Nguyễn Lê Mai Khanh 31221026503 100%

N1 - Mai Khanh

1. Rights Offerings Hyde, Inc., is proposing a rights offering. Presently, there are
585,000 shares outstanding at $87 each. There will be 95,000 new shares offered at
$78 each.

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

The new market value will be the current shares outstanding times the stock price plus
the rights offered times the rights price, so:

New market value = 585,000x($87) + 95,000x($78) = $58,305,000

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

The number of rights associated with the old shares is the number of shares
outstanding divided by the rights offered, so:

Number of rights needed = 585,000/95,000 ≈ 6.16 rights per new share.

N2 - Xuân Khánh

(continue)

c. What is the ex-rights price?

Ex-rights price = (585,000 x $87) / (585,000 + 95,000) = $74.85

d. What is the value of a right?

Value of a right = $87 - $84.85 = $2.15

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

Reasons for rights offering:

Hyde, Inc. might prefer a rights offering over a general cash offer to:

+ Maintain control: Prevent dilution of ownership for existing

shareholders.
+ Reduce costs: Lower transaction costs compared to a general cash offer.
+ Improve investor relations: Signal confidence in the company's future
and strengthen relationships with existing shareholders.

N3 - Huyền Trân

2. Rights Offering The Clifford Corporation has announced a rights offer to raise $26
million for a new journal, the Journal of Financial Excess. This journal will review
potential articles after the author pays a nonrefundable reviewing fee of $5,000 per
page. The stock currently sells for $34 per share and there are 2.7 million shares
outstanding.

a. What is the maximum possible subscription price? What is the minimum?

The maximum subscription price is the current stock price, or $34. The minimum
price is anything greater than $0.

b. If the subscription price is set at $27 per share, how many shares must be sold?
How many rights will it take to buy one share?

The number of new shares will be the amount raised divided by the subscription price,
so:

Number of new shares = $26,000,000/$27 = 962,962.962 shares

And the number of rights needed to buy one share will be the current shares
outstanding divided by the number of new shares offered, so:

Number of rights needed = 2,700,000 shares outstanding/962,962.962 new shares =

2.8

N4 - Thanh Dung

c. What is the ex-rights price? What is the value of a right?

Pex-right = 34 * 2,700,000 + 26,000,0002,700,000 + 962,963 = 32.16$.

Vright = P - Pex-right = 34 - 32.16 = 1.84$.

d. Show how a shareholder with 1,000 shares before the offering and no desire (or
money) to buy additional shares is not harmed by the rights offer.

Before the offer, a shareholder will have the shares owned at the current market price

→ Portfolio value = (1,000 shares)($34) = $34,000

After the rights offer, the share price will fall, but the shareholder will also hold the
rights

→ Portfolio value = (1,000 shares)($32.16) + (1,000 rights)($1.84) = $34,000

N5 - Khánh Huyền

14. Rights Valley Corp.’s stock is currently selling at $43 per share. There are 1.3
million shares outstanding. The firm is planning to raise $2.9 million to finance a new
project. What are the ex-rights stock price, the value of a right, and the appropriate
subscription prices under the following scenarios?

a. Two shares of outstanding stock are entitled to purchase one additional share of the
new issue.

b. Four shares of outstanding stock are entitled to purchase one additional share of the
new issue.

c. How does the stockholders’ wealth change from part (a) to part (b)?

a. + The number of new shares offered through the rights offering is the existing
shares divided by the rights per share, or:

New shares = 1,300,000 / 2 = 650,000

And the new price per share after the offering will be:

P = (Current market value + Proceeds from offer) / (Old shares + New shares)

P = (1,300,000($43) + $2,900,000) / (1,300,000 + 650,000) = $30,15

+ The subscription price is the amount raised divided by the number of new
shares offered, or:
 Subscription price = $2,900,000 / 650,000 = $4,46

And the value of a right is:

Value of a right = (Ex-rights price – Subscription price) / Rights needed to buy

a share of stock = ($30,15 – $4,46) / 2 = $12,85

b. + New shares = 1,300,000 / 4 = 325,000

And the new price per share after the offering will be:

P = (Current market value + Proceeds from offer) / (Old shares + New shares)

P = (1,300,000($43) + $2,900,000) / (1,300,000 + 325,000) = $36,18

+ The subscription price is the amount raised divided by the number of number
of new shares offered, or:

Subscription price = $2,900,000 / 325,000 = $8,92

And the value of a right is:

Value of a right = (Ex-rights price – Subscription price) / Rights needed to buy

a share of stock = ($36,18 - $8,92) / 4 = $6,815

c. (a):
- Total shares after the issue: 1.950.000
- Ex-rights price: $30.15
- Total value: 1.950.000 × 30.15 = $58.792.500
(b):
- Total shares after the issue: 1.625.000
- Ex-rights price: $36.18
- Total value: 1.625.000 × 36.18 = $58.792.500
-> Conclusion: The total value remains the same in both scenarios, indicating
no change in stockholders' wealth.