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 $25. 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 $42 per share and the rights sell for $2 each.

What price should the stock sell for ex-rights?

What is the value of one right?

Are the rights underpriced or overpriced?

What is the amount of instant profit you can make on ex-rights day per new share?