Question 15.1: In the National Power example, suppose the subscription pric...

To raise $5 million, $5 million/$8 = 625,000 shares will need to be sold. There are 1 million shares outstanding, so it will take 1 million/625,000 = 8/5 = 1.6 rights to buy a new share of stock (you can buy five new shares for every eight you own). After the rights offer, there will be 1.625 million shares, worth $25 million altogether, so the per-share value will be $25/1.625 = $15.38. The value of a right in this case is the $20 original price less the $15.38 ending price, or $4.62.