The value of one right for Boles Bottling Company is $1.50. This is calculated by subtracting the subscription price from the current stock price and dividing by the number of rights needed.
To determine the value of one right for Boles Bottling Company, we can analyze the current market conditions. Given that the subscription price for a new share is $40 and six rights, plus the subscription price, are necessary to acquire one share, the total cost of obtaining a share through rights is $40 + (6 * value of one right). Considering the stock is currently trading at $49 rights-on, we can set up an equation:
49=40+(6×value of one right)
Solving for the value of one right, we get value of one right = (49-40)/6 =$1.50. Therefore, the value of one right for Boles Bottling Company is $1.50. This implies that each right contributes $1.50 towards the purchase of a new share at the subscription price, aligning with the current market dynamics. Investors can use this information to make informed decisions regarding the exercise of rights in acquiring additional shares in the company.
Complete question below:
Boles Bottling Company has granted rights to its shareholders, with a subscription price of $40. To purchase one new share, six rights, in addition to the subscription price, are required. Currently, the stock is trading at $49 rights-on. Calculate the value of one right.