Mitsi Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take three rights to buy a new share in the offering at a subscription price of $61. At the close of business the day before the ex-rights day, the companys stock sells for $85 per share. The next morning, you notice that the stock sells for $70 per share and the rights sell for $2 each. What price should the stock sell for ex-rights? Show your calculations to get credit. Answers without numeric calculations will not get credit.

1. What is the value of one right?
2. Are the rights underpriced or overpriced?
3. What is the amount of instant profit you can make on ex-rights day per new share?