Computer Graphics has announced a rights offering for its shareholders. Carol St

Question

Computer Graphics has announced a rights offering for its shareholders. Carol Stevens owns 3,200 shares of Computer Graphics stock. Five rights plus $72 cash are needed to buy one of the new shares. The stock is currently selling for $96 rights-on.

What is the value of a right? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

How much cash would this require? (Omit the "$" sign in your response.)

What is the value of a right? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Value of the Right = (96 - 72)/(5+1) = 4

Part B:

Number of Shares = 3200/5 = 640 Shares

Part C:

Cash Required = 640*72 = 46080

Thanks.

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