Question

Which formula may be used for valuation of 'right of pre-emption' ? A . V = Pm-V/S-V
B. V= Pm+Pe/n+1
C. V=Pm+Pe/n-1
D. V=S/n-1​

Answer 1

Answer:

c

Explanation:

i just can't explain but think so

Answer 2

The correct answer to this question is option B. V= Pm+Pe/n+1

Explanation:

• The valuation of 'right of pre-emption' can be done during the three-day rights period.

• Investors with reemption rights are told the cost for which they can purchase the shares — typically at a discount to the current market price.

• These same investors are also informed about how many rights they must purchase for one share of stock.

• From all this information the hypothetical price can be calculated, by the given formula.

• $\frac{(Stock Price - Rights subscription price per share) }{(Number of rights required to buy one share + 1)}$