The stock of Cleaner Homes is currently selling for $15.40 a share. The new rights offering grants one right for each share of stock outstanding. The new shares being offered are priced at $13 plus three rights. What is the value of one right?

$0.60

Explanation:

Calculation for the value of one right

The first step is to calculate for the cost per share.

Using this formula

Cost per share =[New share price+(New Share right*Stock price)]/ (One right +New Share right)

Let plug in the formula

Cost per share [$13 + (3 × $15.40)] / (1 + 3)

Cost per share =$13+$46.20/4

Cost per share =$59.20/4

Cost per share = $14.80

The second step is to calculate for the Value of right.

Using this formula

Value of right=New share price-Cost per share

Let plug in the formula

Value of right = $15.40 - 14.80

Value of right= $0.60

Therefore the value of one right will be $0.60

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