Discussing Rights and Ex-Rights
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Jane Boles Bottling Co. has issued rights to its shareholders. The subscription price is $45 and four rights are needed along with the subscription price to buy one of the new shares. The stock is selling for $55 rights-on.
a. What would be the value of one right?
b. If the stock goes ex-rights, what would the new stock price be?
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Solution Summary
In 150 words, this solution addresses this concept of rights and ex-rights in relation to stock prices. All calculations and steps are provided.
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a. What would be the value of one right?
Value of one right = (Market value of stock, rights on - Subscription price)/(Number of rights required to buy a new share + 1)
Value of one right = ...
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