Immediate Profit for Mitisi Inventory Systems
Not what you're looking for?
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 the ex-rights day, the company's stock sells for $80 per share. The next morning you notice that the stock sells for $72per share and the rights 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.
Purchase this Solution
Solution Summary
The expert examines immediate profit for Mitisi inventory systems are examined.
Solution Preview
The ex-rights price is
P = (40+80*4)/(1+4) = 72
Value of the stock right = 80 - 72 = $8
Since the rights currently ...
Purchase this Solution
Free BrainMass Quizzes
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.