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Calculate the ex-rights stock price

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Question - PU Ltd contemplates raising $2,000,000 through rights offering. The subscription price is $25 per share. The company has 320,000 shares outstanding. The stock is currently trading at $30 per share.

(a) Calculate the number of rights necessary to buy one new share of stock. (Show your calculations).

(b) Calculate the ex-rights stock price and the value of a right. (Show your calculations).

(c) Briefly explain what you should do if the price of a right is lower than that from part (b).

Reference no: EM132954412

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