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    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 Preview

    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 = ...

    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.