Mr. and Mrs. Anderson own two shares of Magic Tricks Corporation's common stock. The market value of the stock is $62. The Andersons also have $50 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $50 for each two shares currently owned (based on two rights). (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
a. What is the value of a right?
Value per right ______.
b. What is the value of the Andersons’ portfolio before the rights offering? (Portfolio in this question represents stock plus cash.)
Portfolio value ___________.
c-1. Compute the diluted value (ex-rights) per share.
Diluted value_______.
c-2. If the Andersons participate in the rights offering, what will be the value of their portfolio, based on the diluted value (ex-rights) of the stock?
Portfolio value _______.
d. If they sell their two rights but keep their stock at its diluted value and hold on to their cash, what will be the value of their portfolio?
Portfolio value ______.