Are the rights under priced or over priced

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Reference no: EM131962598

Knight Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take three rights to buy a new share in the offering at a subscription price of $61. At the close of business the day before the ex-rights day, the company’s stock sells for $85 per share. The next morning, you notice that the stock sells for $70 per share and the rights sell for $2 each.

What is the value of the stock ex-rights? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Stock ex-rights $

What is the value of a right?

Value of a right $

Are the rights under priced or overpriced?

Under priced Over priced

What is the amount of immediate profit you can make on ex-rights day per share?

Immediate profit $

Reference no: EM131962598

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