The Timken Company has announced a rights offer to raise $5.1 million. The company's stock currently sells for $34 per share, there are 1.207 million shares outstanding, and one right will be granted for each outstanding share. The subscription price is set at $30 per share. What is the ex-rights price per share?

Right price = $33.50

Explanation:

The theoretical ex-right price is the weighted average price at which shares are expected to settle after a right-issue,

It is the weighted average price of value of shares of the before-right price and the right price

Ex-rights price

= (Before-right value of shares + Proceed from rights) / Total number of shares after rights issue

Number of rights issue units = amount to be raised / Right price per share

= $5.1 m/$30 = 170,000 units

Before - rights value = 1,207,000 * $34 = 41,038,000

Proceed from rights = 170,000 * $30 = 5,100,000

The ex-right price = (41,038,000 + 5,100,00) / (1,207,000 + 170,000) units

Right price = $33.50