Question
Mr. and Mrs. Anderson own five shares of Magic Tricks Corporation's common stock. The market value of the stock is $76. The Andersons also have
Mr. and Mrs. Anderson own five shares of Magic Tricks Corporation's common stock. The market value of the stock is $76. The Andersons also have $58 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $58 for each five shares currently owned (based on five rights). |
(Do not round intermediate calculations and round your answers to the nearest whole dollar.) |
a. | What is the value of a right? |
Value per right | $ |
b. | What is the value of the Andersons portfolio before the rights offering? (Portfolio in this question represents stock plus cash.) |
Portfolio value | $ |
c-1. | Compute the diluted value (ex-rights) per share. |
Diluted value | $ |
c-2. | 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? |
Portfolio value | $ |
d. | If they sell their rights but keep their stock at its diluted value and hold on to their cash, what will be the value of their portfolio? |
Portfolio value | $ |
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