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mrs_skeptik [129]
4 years ago
14

Knight 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 $53. At the close of business the day before the ex-rights day, the company’s stock sells for $80 per share. The next morning, you notice that the stock sells for $65 per share and the rights sell for $2 each.
Required:
a. Are the stock and the rights correctly priced on the ex-rights day?
b. Describe a transaction in which you could use these prices to create an immediate profit.
Business
1 answer:
bekas [8.4K]4 years ago
3 0

Answer:

a. Are the stock and the rights correctly priced on the ex-rights day?

stock price at ex-right = [(3 x $80) + $53] / 4 = $73.25

cost of ex-right = $80 - $73.25 = $6.75

the rights are underpriced since they are sold at $2, and they should sell at $6.75

b. Describe a transaction in which you could use these prices to create an immediate profit.

You can purchase 3 rights at $6 and then pay subscription price ($53) and you would have an stock at $59. Your profit = $65 - $59 = $6 per stock.

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Suppose there is a simultaneous increase in the demand for rice and increase in the supply of rice. Which of the following will
patriot [66]

Answer:

C) The market learing price may rise, fall, or stay the same, but the equilibrium quantity will rise. 

Explanation:

An increase in demand would lead to an increase in demand and price.

An increase in supply would lead to an increase in supply and a fall in price.

The combined effect would lead to an increase in equilibrium quantity but the effect on equilibrium price would be indeterminate.

I hope my answer helps you

6 0
3 years ago
Zephyr Electricals is a company with no growth potential. Its last dividend payment was $4.50, and it expects no change in futur
VARVARA [1.3K]

Answer: $50

Explanation:

We can use the Gordon Growth Model of Stock Valuation. The formula is thus,

P = D1 / r – g

D1 = the annual expected dividend of the next year

r = rate of return

g = the expected dividend growth rate (assumed to be constant)

There is no growth potential and dividends are expected to stay the same so no growth rate and D1 will be the same as D0.

Plugging that into the formula therefore will give us

P = D1/r

P= 4.5/0.09

= $50

Current Stock Price is $50.

6 0
3 years ago
If a business person wants to get information about a special product to a wide variety people across a large geographic range,
Westkost [7]

Answer: Internet.

Explanation:

The internet is the fastest way a business can advertise it's products to a global audience. The internet is a wireless interconnection of computers across the Earth, where communication is made easier and information is shared.

4 0
3 years ago
Ramiro has written a long paragraph that describes the two main causes of employee absenteeism. Ideally, how many paragraphs doe
djyliett [7]

In such a material, the number of paragraphs that Ramiro needs in order to be able to cover  a material of this sort is 4.

<h3>What is a paragraph?</h3>

This can be explained to be a section or a part of writing that is usually made up of a particular theme.

Paragraphs are usually created through the use of new spaced lines and indentation in research and other forms of writings.

Read more on paragraphs here:

brainly.com/question/1205541

#SPJ1

7 0
2 years ago
Tom produces commemorative t-shirts in a competitive market. if tom decides to decrease his output, this will
wolverine [178]

In a competitive market, a large number of producers compete with each other to satisfy the needs of their consumers. In here, no one or group of producers can dictate the price.  <span>They have only one major decision to make—and that is, what quantity to produce.  Therefore, when Tom decided to produce commemorative t-shirts, and decrease his output, This decision did not increase his revenue, since did not lead to higher market price nor the competitors will decrease their output. </span><span> The answer is C. decrease his revenue, for price remains the same.</span>

6 0
4 years ago
Read 2 more answers
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