What is the value of the stock ex-rights? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Stock
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Problem 15-15 Valuing a Right [LO4]

Knight Inventory Systems, Inc., has announced a rights

offer. The company has announced that it will take three rights to buy a new share in the offering at a subscription price of $55. At the close of business the day before the ex-rights day, the company's stock sells for $90 per share. The next morning, you notice that the stock sells for $70 per share and the rights sell for $3 each.

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What is the value of the stock ex-rights? (Do not round intermediate calculations and
round your answer to 2 decimal places, e.g., 32.16.)
Stock ex-rights
What is the value of a right? (Do not round intermediate calculations and round your
answer to the nearest whole number, e.g., 32.)
Value of a right

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Are the rights underpriced or overpriced?
What is the amount of immediate profit you can make on ex-rights day per share? (Do
not round intermediate calculations and round your answer to the nearest whole
number, e.g., 32.)
Immediate profit

Top Answer

Stock ex-rights = $81.25 Value of a... View the full answer

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