Question

Jefferson Refining is issuing a rights offering wherein every shareholder will receive one right for each share of stock they own. The new shares in this offering are priced at $19 plus 3 rights. The current market price of the stock is $26.80 a share. What is the value of one right? Provide your answer in dollars and cents, to the nearest $0.01.

Answer 1

value of right = $1.95

Step-by-step explanation:

given data

new shares = $19 plus 3

current market price = $26.80

to find out

value of one right

solution

we get here value of rights that is express as

value of rights =
`(stock \ price - right\ subcription\ price)/(no\ of\ right + 1)` .............1

value of rights =
`(26.80-19)/(3+ 1)`

value of rights =
`(7.8)/(4)`

value of right = $1.95