The Stock of Byron Enterprises Is Currently Selling for $48

question 285

Multiple Choice

The stock of Byron Enterprises is currently selling for $48 a share. The company has decided to raise funds through a rights offering wherein every shareholder will receive one right for every
Share of stock they own. The new shares being offered are priced at $42 plus five rights. What is
The value of one right?

• A) $0.20
• B) $0.50
• C) $1.00
• D) $5.00
• E) $6.00

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Definitions:

Cash Inflows

The total amount of money being transferred into a business, usually from operating, investing, and financing activities.

Discount Rate

The rate applied within discounted cash flow analysis for assessing the present worth of forthcoming cash flows.

Net Present Value

A method of evaluating investments by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Initial Investment

The initial amount of money spent to start a project, investment, or business, often including costs such as purchasing equipment, property, or technology.