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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 Valuing a Right LO
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 $ At the close of business the
day before the exrights day, the company's stock sells for $ per share. The next morning, you notice that
the stock sells for $ per share and the rights sell for $ each.
What is the value of the stock exrights? Do not round intermediate calculations and round your
answer to decimal places, eg
Stock exrights
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 exrights day per share?
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