Ex rights price
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Mitisi Inventory Systems, Inc. has announced a rights offering. The company has announced that it will take four rights to buy a new share in the offering at a subscription price of $40. At the close of business the day before ex-rights day, the company's stock sells for $80 per share. The next morning you notice that the stock sells for $72 per share and the right sell for $6 each. Are the stock and/or the rights correctly priced on the ex-rights day? Describe a transaction in which you could use these prices to create an immediate profit.
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Solution Summary
The solution explains how to calculate the ex rights price
Solution Preview
The first step is to calculate the price on the ex-rights day
The ex-right price of the stock =( Number of rights X Price before ex-rights + Subscriptip Price)/(Number of rights + ...
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