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QUESTION
Computer Graphics has announced a rights offering for its shareholders. Carol Stevens owns 1,200 shares of Computer Graphics' stock. Four rights plus...
Computer Graphics has announced a rights offering for its shareholders. Carol Stevens owns 1,200 shares of Computer Graphics' stock. Four rights plus $60 cash are needed to buy one of the new shares. The stock is currently selling for $72 rights-on. What is the value of a right?How many of the new shares could Carol buy if she exercised all her rights? How much cash would this require?Carol does not know if she wants to exercise her rights or sell them. Would either alternative have a more positive effect on her wealth?
Answera) For every 4 shares =1 new share is given For every 1200 shares =1/4*1200=300 new sharesValue of Right = New Shares/Total Shares*(Market price of old one share-Issue price of newshare)...