Calculate the Value of a Right Given the Following Information

question 101

Multiple Choice

Calculate the value of a right given the following information: 4 of rights to buy one share; subscription price of $12; $32 common share price during the rights-on period.

• A) $3.50
• B) $4.00
• C) $4.50
• D) $5.00
• E) $5.50

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Definitions:

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business, important for assessing liquidity, flexibility, and overall financial performance.

Interest Rate

The charge applied by a lender to a borrower for the employment of assets, indicated as a portion of the principal.

Provincial Lottery

A government-regulated gambling competition operated at the provincial level, where players buy tickets for a chance to win prizes.

Time Value

The understanding that possessing money today has greater value than possessing the same amount in the future, attributed to its capacity to yield earnings.