Assuming Everything Else Is Constant,if a Stock's Old Price Is

question 3

Multiple Choice

Assuming everything else is constant,if a stock's old price is $40 and the ex-rights or new stock price is $32,then the value of the right is:

• A) -$8.
• B) $8.
• C) impossible to determine without the subscription price.
• D) impossible to determine without the number of rights needed to buy one share.

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Definitions:

Equity Firms

Equity firms, often referred to as private equity firms, are investment companies that acquire, manage, and sell stakes in companies, using their funds or raised capital.

Net Present Value

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

Synergy Value

The additional value created from combining two or more entities, where the whole is greater than the sum of its parts.

Equity-Financed

Pertaining to a business or project that is funded through the sale of equity or shares rather than debt.