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3.) The M Co. has announced a rights offer. The company has announced that
it will take four rights to buy a new share in the offering at a
subscription price of $40. At the close of business the day before the ex-
rights day, the company’s stock sells for $75 per share. The next morning
you notice that the stock sells for $68 per share and the rights sell for $6
per share.
REQUIRED:
a.) Are the stock and/or the rights correctly priced on the ex-rights day?