Question 1. Stock in Rich Corporation is currently selling for $25.00 per share. The firm's dividend yield is 10%.
A. If the firm distributes 40% of its earnings, what are its earnings?
B. What is the firm's P/E ratio?
Question 2. The Gold Mining Corporation is seeking to raise $10,000,000 through a rights offering. The company presently has 1,000,000 shares of common stock outstanding at a current market price of $25.00 per share.
A. How many new shares must be sold via the rights offering if the subscription price of the new stock is $20 per share?
B. How many new shares could a stockholder owing 100 shares purchase?
C. What is the value of one right?
D. What will the approximate price of the stock ex-rights?