Question

Which of the following statements is false with respect to the use of rights in financing?...

Which of the following statements is false with respect to the use of rights in financing?

A. Rights offerings are used by many U.S. companies

B. Shares are usually priced at a premium

C. Rights offerings are especially popular in Europe

D. All of these statements are true

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Answer #1

ANS: Option (B) (Shares are usually priced at a premium)

Right shares are those shares which are issued after the original issue of shares but having inherent right of existing shareholders.Listed companies issues the Right shares in to existing shareholders in proportion to their existing shareholdng. Right issues bring an opportunity to the existing shareholders to increase their stakeholding in company at reduced cost.

Hence, Right shares are issued at discounted price to the existing shareholders to encourage them to purchase them Right Issue.So, Right shares are not usually priced at premium.

Therefore, Option B is incorrect (False)

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