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

$$80\mathrm{.}00$

$2$ decimal places required.

What is the value of a right? $($Do not round intermediate calculations and round your

answer to the nearest whole number, e$.$g$.,32.)$

Value of a right

Are the rights underpriced or overpriced?

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

not round intermediate calculations and round your answer to the nearest whole

number, e$.$g$.,32.)$