The stock of the HAL Computer Corporation is selling for $50 per share. The company then issues

Question:

The stock of the HAL Computer is selling for $50 per share. The company then issues rights which allow holders to subscribe for one new share at $40 for each five rights held.
a. What is the theoretical value of a right if the stock is selling "rights-on"?
b. What is the theoretical value of one share of stock when it goes "ex-rights"?
c. What is the theoretical value of a right if the stock sells "ex-rights" at $50?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...