Assuming Everything Else Is Constant,when an Equity Goes Ex-Rights Its

question 31

Multiple Choice

Assuming everything else is constant,when an equity goes ex-rights its price should:

• A)decrease since the shareholder is losing an option.
• B)increase since the corporation no longer has the right to force the shareholder to convert.
• C)remain the same since an efficient market would anticipate this change.
• D)move up or down depending on whether a small investor wanted to exercise his/his rights.
• E)None of the above.

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Definitions:

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenue, according to standard accounting practices.

Industry Expansion

The growth in production, workforce, or market share within a specific sector of the economy.

Constant-cost Industry

An industry in which the costs of production or the prices of inputs do not change as the industry expands or contracts.

Entry or Exit

The process of a firm beginning operations in a market (entry) or leaving a market (exit), influenced by factors like profitability and barriers to entry.