Valuing a Right Mitsi Inventory Systems has announced a rights offer. The company has announced that it
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Valuing a Right Mitsi Inventory Systems has announced a rights offer. The company has announced that it will take four rights to buy a new share in the offering at a subscription price of €40. At the close of business the day before the ex-rights day the company’s shares sell for €80 per share. The next morning you notice that the equity sells for €72 per share and the rights sell for €6 each. Are the equity and/or the rights correctly priced on the ex-rights day? Describe a transaction in which you could use these prices to create an immediate profit.
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780077178239
3rd Edition
Authors: David Hillier, Iain Clacher, Stephen A. Ross
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