Answer :
The company will issue average 216,667 shares: 150,000 rights and 66,667 additional shares. This will raise $2 million to fund the Diamond in the Rough campaign.
(Number of additional shares x Price per share) = $2 million
Therefore, the number of additional shares must be:
(2 million / 30) = 66,667 additional shares.
This means the company will have to issue a total of 216,667 shares: 150,000 rights to buy 1 share and 66,667 additional shares.
To determine how many shares should be issued to raise $2 million, the following equation can be used: (Number of additional shares x Price per share) = $2 million. The company currently has 0.75 million shares outstanding priced at $30 each. Therefore, the number of additional shares must be: (2 million / 30) = 66,667 additional shares. This means the company will have to issue a total of 216,667 shares: 150,000 rights to buy 1 share and 66,667 additional shares. This will allow the company to raise the necessary $2 million for its Diamond in the Rough campaign.
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