Question

Mr. and Mrs. Anderson own three shares of Magic Tricks Corporation's common stock. The market value of the stock is $60. The Andersons also have $48 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $48 for each three shares currently owned (based on three rights). (Do not round intermediate calculations and round your answers to the nearest whole dollar.) a. What is the value of a right?

Answer 1

$2

Explanation:

According to the given situation, the computation of the value of a right is shown below:-

Value of a right = (Market value of right + Subscription right) ÷ Number of rights 1

= ($60 - $48) ÷ (5 + 1)

= $12 ÷ 6

= $2

Therefore for computing the value of a right we simply applied the above formula and the same is to be considered