How much is the value of the right


Question 1: A firm has a market value equal to its book value. Currently, the firm has excess cash of $400 and other assets of $7,600. Equity is worth $8,000. The firm has 200 shares of stock outstanding and net income of $900. The firm has decided to pay out all of its excess cash as a cash dividend. What will the earnings per share be after the dividend is paid?

Question 2: The Wordsmith Corporation has 10,000 shares outstanding at $30 each. They expect to raise $150,000 by a rights offering with a subscription price of $25. How many rights must you turn in to get a new share?

Question 3: Assuming everything else is constant, if a stock's old price is $25 and the ex-rights or new stock price is $19, then how much is the value of the right?

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Business Law and Ethics: How much is the value of the right
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