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Question 2. In the raising capital chapter, we learned that firms can raise capital by using rights offering. Now assume that you know the stock
Question 2. In the raising capital chapter, we learned that firms can raise capital by using rights offering. Now assume that you know the stock price before the ex-right date (Mo) and subscription price (S) in the rights offering. In addition, the new issues and current shares outstanding are also known. Show me how to derive the value of a right. Also please explain what each side of equation represent in your model. Hint: _Mo-S (Value of a right = you need to show me how to derive this formula)
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