Problem $20-18$ Valuing a Right

Knight Inventory Systems, Incorporated, 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 $$35.$ At the close of business the day before the ex$-$rights day, the company$$s stock sells for $$65$ per share. The next morning, you notice that the stock sells for $$55$ per share and the rights sell for $$3$ each.

What price should the stock sell for ex$-$rights? $($Do not round intermediate calculations and round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

What is the value of one right? $($Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.)$

Are the rights underpriced or overpriced?

multiple choice

Underpriced

Overpriced

What is the amount of instant profit you can make on ex$-$rights day per new share? $($Do not round intermediate calculations and round your answer to the nearest whole number, e$.$g$.,32.)$