Nine rights are necessary to purchase one share of Fogel stock at $50. A right sells for a $4. The ex-rights value of Fogel stock is
1. Kingston Kitchen Stuff has recently sold 1,000 shares of $6.75 preferred stock. What is the value of the stock assuming 10 percent required rate of return?
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To calculate the ex-rights value of Fogel stock, we need to understand what rights are and how they affect the stock price.
Rights are a type of financial instrument that allow existing shareholders to purchase additional shares of stock in a company at a discounted price. In this case, nine rights are necessary to purchase one share of Fogel stock at $50.
First, let's calculate the total cost of purchasing one share of Fogel stock using rights. If one share of Fogel stock is priced at $50, and it requires nine rights to purchase one share, the total cost of obtaining the nine rights would be 9 x $4 = $36.
To calculate the ex-rights value of Fogel stock, we need to subtract the total cost of obtaining the rights from the current stock price. So, the ex-rights value would be $50 - $36 = $14.
Therefore, the ex-rights value of Fogel stock is $14.
9 rights X $4 = 36
36 + $50 Stock = $86
Ex rights value of Fogel stock is $86.