Knight inventory systems inc has announced a rights offer, Ask an Expert

Finance

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 $45. At the close of business the day before the ex-rights day, the company's stock sells for $80 per share. The next morning, you notice that the stock sells for $60 per share and the rights sell for $2 each.

1. 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.)

2. What is the value of a right?

3. Are the rights underpriced or overpriced?

4. What is the amount of immediate profit you can make on ex-rights day per share?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92258609

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