A companys stock currently sells for $87 per share. Last week the firm issued rights to raise

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A company’s stock currently sells for $87 per share. Last week the firm issued rights to raise new equity. To purchase a new share, a stockholder must remit $20 and three rights. 

a. What is the ex-rights stock price? 

b. What is the price of one right? 

c. When will the price drop occur? Why will it occur then?

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Corporate Finance

ISBN: 978-1259918940

12th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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