What is amount of instant profit you can make on ex right

Assignment Help Financial Management
Reference no: EM13895387

Mitsi 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 $39. At the close of business the day before the ex-rights day, the company’s stock sells for $60 per share. The next morning, you notice that the stock sells for $52 per share and the rights sell for $3 each.

A. What price should the stock sell for ex-rights? (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

B. What is the value of the rights? (Do not round intermediate calculations.)

C. Are the rights underpriced or overpriced?

D. What is the amount of instant profit you can make on ex rights day per new share? (Do not round intermediate calculations.)

Reference no: EM13895387

Questions Cloud

Expected return on your investments over whole period : You are 30 years old today and planning to retire at age 62. You want to plan your finances for living 35 years past age 62 and die dead broke. You determine you will need $3000 per month from age 62 for the 35 years. Your plan is to go live in the t..
Call premium plus put premium : An Asset currently trades at price S0. Let V0 be the current price (call premium plus put premium) of an at-the-money straddle on A expiring in one month. You have an initial capital amount of C0 and execute the following strategy. - keep C in cash w..
Calculate the bonds price in details : In February 2009 Treasury 6s of 2026 offered a semiannually compounded yield of 3.5965%. Recognizing that coupons are paid semiannually, calculate the bond's price in details. What is the cupon rate / what is the YTM?
Discuss the risk–return trade-offs of the two projects : Blair Gasses and Chemicals is a supplier of highly purified gases to semiconductor manufacturers. A large chip producer has asked Blair to build a new gas production facility close to an existing semiconductor plant. Find the breakeven cash inflow fo..
What is amount of instant profit you can make on ex right : Mitsi 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 $39. At the close of business the day before the ex-rights day, the co..
Financial statement-why the operating results differ : Find and download the basic financial statements of a city’s website and analyze the two operating statements in detail and prepare a succinct and understandable explanation of the results of operations of this government from the perspective of each..
How much debt is displaced by this lease : High electricity costs have made Farmer Corporation’s chicken-plucking machine economically worthless. Only two machines are available to replace it. The International Plucking Machine (IPM) model is available only on a lease basis. How much debt is ..
Used by the company to hedge its exposure : A US company knows it will have to pay 3 million euros in three months. The current exchange rate is 1.4500 dollars per euro. Discuss how forward and options contracts can be used by the company to hedge its exposure.
Explore the capital budgeting techniques covered in the unit : Explore the capital budgeting techniques covered in the unit, NPV, PI, IRR, and Payback. Compare and contrast each of the techniques with an emphasis on comparative strengths and weaknesses. Be sure to show you understand how each is applied and used..

Reviews

Write a Review

Financial Management Questions & Answers

  Value of savings account

At the end of 2011, the value of my savings account was $20,000. Over the next three years, the rates of return on the account were as shown below. How much was in the account at the end of the third year, 2014?

  Equivalent annual annuity

Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $23,000, which will generate cash flows of $8,000 at the end of each of the next 6 years.

  What must the average beta of the new stocks added

What must the average beta of the new stocks added to the portfolio be to achieve the desired required rate of return

  Fixed-rate mortgage

You have decided to buy a house. You can get a mortgage rate of 5 percent, and you want your payments to be $1,540 or less. How much can you borrow on a 15-year fixed-rate mortgage?

  What is the projects discounted payback period

A project has an initial cost of $925, expected net cash inflows of $690.30 per year for 4 years, and a cost of capital of 11.10%. What is the project's discounted payback period?

  Type of corporate restructuring-fits with common theories

Identify the type of corporate restructuring that fits with common theories of what are assumed to be causes of mergers and acquisitions.

  NPV under most optimistic projection of annual savings

If a better motor fluid is used, the capital cost will increase by 350, but fluid losses will be reduced through the 30 year life of the project. The optimistic, most likely, and pessimistic projections are 35, 30 and 23. All estimates are inflation ..

  What is the intrinsic value of the option

What is the intrinsic value of the option and what is the option's time premium at this price - What is the current selling price for a) and b)?

  What is the value of a bond that has a par value

What is the value of a bond that has a par value of $1,000, a coupon rate of 8.26 (paid annually), and that matures in 30 years? Assume required rate of return on this bond is 8.65 percent

  Other transaction costs or finance charges

Mike Bayles has just arranged to purchase a $460,000 vacation home in the Bahamas with a 25 percent down payment. The mortgage has a 5.2 percent stated annual interest rate, compounded monthly, and calls for equal monthly payments over the next 30 ye..

  What price will you receive a margin call

You buy 600 shares of stock at a price of $86 and an initial margin of 75 percent. If the maintenance margin is 40 percent, at what price will you receive a margin call?

  Among the cash management techniques used by most

among the cash management techniques used by most businesses are those that slow down their bill payments. a good

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd