Final answer:
The value of one right for Baxter, who owns 15 shares at $20 each under a rights offer where 3 rights plus $10 can buy a new share, is approximately $3.33. The valuation takes into account the added worth to Baxter's portfolio after exercising all the rights.
Step-by-step explanation:
To calculate the value of one right when Baxter owns 15 shares of stock valued at $20 a share and receives one right per share, with the rights offer allowing him to buy one new share for 3 rights plus $10, we can follow these steps:
- First, determine the total value of the shares without the rights, which is 15 shares × $20 = $300.
- Then, calculate the value of the new shares he can buy with the rights. With 15 rights (1 per share), he can buy 5 new shares (since it takes 3 rights to buy one share) at $10 each, totalling $50.
- Now, find the total value after he exercises all rights, which would be the initial $300 plus the $50 for the new shares, equalling $350.
- The increase in value due to the rights is $350 - $300 = $50.
- Finally, divide the increase by the number of rights to find the value of one right: $50 ÷ 15 rights = approximately $3.33 per right.
Therefore, the value of one right for Baxter is approximately $3.33.