Mr. and Mrs. Anderson own five shares of Magic Tricks Corporation's common stock. The market value of

Question:

Mr. and Mrs. Anderson own five shares of Magic Tricks Corporation's common stock. The market value of the stock is $60. They also have $48 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $48 for each five shares currently owned (based on five rights).
a. What is the value of a right?
b. What is the value of the Andersons' portfolio before the rights offering? (Portfolio in this question represents stock plus cash.)
c. 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?
d. If they sell their five rights but keep their stock at its diluted value and hold on to their cash, what will be the value of their portfolio?

Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...

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