Problem $15-15$ Valuing a Right $[$LO$4]$

Knight Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take

three rights to buy a new share in the offering at a subscription price of $$45.$ At the close of business the

day before the ex$-$rights day, the company's stock sells for $$80$ per share. The next morning, you notice that

the stock sells for $$60$ per share and the rights sell for $$2$ each.

What is the value of the stock ex$-$rights? $($Do not round intermediate calculations and round your

answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Stock ex$-$rights

What is the value of a right?

Value of a right

Are the rights underpriced or overpriced?

Underpriced

What is the amount of immediate profit you can make on ex$-$rights day per share?