Ten rights are necessary to purchase one share of Fogel stock at $54. A right sells for a $6. The ex-rights value of Fogel stock is...?
To calculate the ex-rights value of Fogel stock, we need to understand what a right is. In this context, a right is a financial instrument that gives existing shareholders the opportunity to purchase more shares of the company's stock at a discounted price.
In this scenario, it is mentioned that it takes ten rights to purchase one share of Fogel stock at a price of $54 per share. The cost of one right is $6.
To find the ex-rights value of the Fogel stock, we need to determine the value of the stock without factoring in the rights. Here are the steps to calculate it:
1. Determine the cost of purchasing one share of Fogel stock without using any rights. Since each right is priced at $6, we can subtract the cost of ten rights ($6 x 10) from the price of one share. This gives us:
$54 - ($6 x 10) = $54 - $60 = -$6
The result of this calculation is -$6, which means that the cost of purchasing one share of Fogel stock without using any rights is -$6. However, negative values do not make sense in this context, so we can conclude that the ex-rights value of Fogel stock is $0.
Therefore, the ex-rights value of Fogel stock is $0.
To calculate the ex-rights value of Fogel stock, we need to consider the number of rights needed to purchase one share of stock and the price of each right.
Given:
- 10 rights are necessary to purchase one share of Fogel stock,
- The price of each right is $6.
First, let's calculate the total cost of purchasing the rights:
10 rights * $6 per right = $60.
Next, let's subtract the cost of the rights from the stock price to determine the ex-rights value:
$54 (stock price) - $60 (cost of rights) = -$6.
The ex-rights value of Fogel stock is -$6, which means the stock value is negative after accounting for the cost of the rights.