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Business, 12.08.2020 08:01 kam3864

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.

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