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Chapter 5: Q12BP-b. (page 568)

Boles Bottling Co. has issued rights to its shareholders. The subscription price is \(45 and four rights are needed along with the subscription price to buy one of the new shares. The stock is selling for \)55 rights-on.

b. If the stock goes ex-rights, what would the new stock price be?

Short Answer

Expert verified

The new stock price is $53.

Step by step solution

01

Information provided in the question

Market value of rights share = $55

Value of the right = $2

02

Calculation of the value of new stock price if share is ex-rights

The new stock price is $

Me=M0-R=$55-$2=$53

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