North Stock Sells for $65 Rights-On, and the Subscription Price

question 4

Multiple Choice

North stock sells for $65 rights-on, and the subscription price is $55. Nine rights are required to purchase one share. The value of a right is ________.

• A) $0.11
• B) $1.11
• C) $1.00
• D) $1.50

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Definitions:

Investment Center

A segment or area of a business responsible for its own revenue, expenses, and assets, and its performance is measured by its return on investment.

Fixed Expenses

These are costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Return On Investment

A measure used to evaluate the efficiency of an investment or compare the efficiencies of several different investments.

Residual Income

The amount of income that an entity has after all costs and expenses, including the cost of capital, have been deducted.