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Chapter 5: 13BP-a (page 571)

13. Computer Graphics has announced a rights offering for its shareholders. Carol Stevens owns 1,400 shares of Computer Graphics stock. Four rights plus \(54 cash are needed to buy one of the new shares. The stock is currently selling for \)66 rights-on.

a. What is the value of a right?

Short Answer

Expert verified

Answer

The value of the right is $2.40.

Step by step solution

01

Information provided in the question

Subscription price = $54

Price of one share = $66

Rights required to purchase a new share = 4

02

Calculation of the value of one right

The value of one right is $2.40.

R=M0-SN+1=$66-$544+1=$125=$2.40

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