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Compute for the theoretical value of the rights

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Reference no: EM132630643

Theoretical Value of Stock Rights

On January 2, 2018, Jupiter Company purchased 10,000 shares of P200 par value ordinary shares at P240 per share of Saturn Company. On March 2, 2018, Saturn Company issued stock rights to its shareholders. The holder needs five rights to purchase one share of ordinary stock at par. The market value of the stock on that date was P320 per share. There was no quoted price for the rights.

Question a. Compute for the theoretical value of the rights assuming the stock is selling right-on.

Question b. Compute for the theoretical value of the rights assuming the stock is selling ex-right.

Reference no: EM132630643

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