Show that the value of a right can be written as Value of a right = PRO
Question:
Show that the value of a right can be written as
Value of a right = PRO − PX = (PRO − PS)/(N + 1)
Where PRO, PS, and PX stand for the rights-on price, the subscription price, and the ex rights price, respectively, and N is the number of rights needed to buy one new share at the subscription price.
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Using P RO as the rightson price and P S as the subscription price we can express the pr...View the full answer
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Related Book For
Corporate Finance
ISBN: 978-0071339575
7th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro
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