Question

"ABC Corporation has declared a rights offering to stockholders of record on Friday, December 10th. Under the offer, shareholders need 10 rights to subscribe to 1 new share at a price of $19. Fractional shares can be rounded up to purchase 1 full share. As of the ex date, the stock is trading at $24. The value of the right is:"

Answer 1

$0.50

Step-by-step explanation:

Calculation for the value of the right

Based on the information given we were told that As of the ex date, the stock was trading at $24 which means that the market price of the amount of $24 have been adjusted on the ex date by the exchange where the stock trades.

Using this formula

Value of the right =(Trading stock- Price of shares to subscribe)/Right to subscribe

Let plug in the formula

Value of the right=($24-$19)/10

Value of the right÷$5/10

Value of the right=$0.50

Therefore the value of the right will be $0.50