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.