Mr and mrs anderson own two shares of magic tricks, Ask an Expert

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Mr. and Mrs. Anderson own two shares of Magic Tricks Corporation's common stock. The market value of the stock is $62. The Andersons also have $50 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $50 for each two shares currently owned (based on two rights). (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

a. What is the value of a right?

Value per right ______.

b. What is the value of the Andersons’ portfolio before the rights offering? (Portfolio in this question represents stock plus cash.)

Portfolio value ___________.

c-1. Compute the diluted value (ex-rights) per share.

Diluted value_______.

c-2. If the Andersons participate in the rights offering, what will be the value of their portfolio, based on the diluted value (ex-rights) of the stock?

Portfolio value _______.

d. If they sell their two rights but keep their stock at its diluted value and hold on to their cash, what will be the value of their portfolio?

Portfolio value ______.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92408258

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