Mr. and Mrs. Anderson own three shares of Magic Tricks Corporation's common stock. The market value of the stock is $56. The Andersons also have $40 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $40 for each three shares currently owned (based on three rights). (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
a. What is the value of a right?
Value of Right _____________
b. What is the value of the Andersons’ portfolio before the rights offering? (Portfolio in this question represents stock plus cash.)
Portfolio value ____________
c-1. Compute the diluted value (ex-rights) per share.
Diluted Value ____________/ (Portfolio value based on diluted value of the stock is 208)
d. If they sell their two rights but keep their stock at its diluted value and hold on to their cash, what will be the value of their portfolio?
Portfolio Value _________