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Mitsi Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take four rights to buy a new share in
Mitsi Inventory Systems, Inc., 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 $29. At the close of business the day before the ex-rights day, the companys stock sells for $50 per share. The next morning, you notice that the stock sells for $44 per share and the rights sell for $2 each. |
What is the value of the stock ex-rights? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
Stock price ex rights | $ |
What is the value of one right? Calculate your answer based on the actual ex-rights price. (Do not round intermediate calculations.) |
Value of one right | $ |
Are the rights underpriced or overpriced? |
Underpriced |
What is the amount of instant profit you can make on ex-rights day per share? |
Instant profit | $ |
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