A companys stock currently sells for $86 per share. Last week the firm issued rights to raise

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A company’s stock currently sells for $86 per share. Last week the firm issued rights to raise new equity. To purchase a new share, a stockholder must remit $7 and three rights.
a. What is the ex-rights stock price?
b. What is the price of one right?
c. When will the price drop occur? Why will it occur then?

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Corporate Finance Core Principles and Applications

ISBN: 978-1259289903

5th edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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