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Problem 1 5 - 1 5 Valuing a Right [ LO 4 ] Knight Inventory Systems, Inc., has announced a rights offer. The company has

Problem 15-15 Valuing a Right [LO4]
Knight 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 $45. At the close of business the
day before the ex-rights day, the company's stock sells for $80 per share. The next morning, you notice that
the stock sells for $60 per share and the rights sell for $2 each.
What is the value of the stock ex-rights? (Do not round intermediate calculations and round your
answer to 2 decimal places, e.g.,32.16.)
Stock ex-rights
What is the value of a right?
Value of a right
Are the rights underpriced or overpriced?
Underpriced
What is the amount of immediate profit you can make on ex-rights day per share?
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