Knight Inventory Systems, Inc., has announced a rights offer. The company has announced that it will take three rights to buy a new share in the offering at a subscription price of $53. At the close of business the day before the ex-rights day, the company’s stock sells for $80 per share. The next morning, you notice that the stock sells for $65 per share and the rights sell for $2 each. Required:
a. Are the stock and the rights correctly priced on the ex-rights day?
b. Describe a transaction in which you could use these prices to create an immediate profit.

Suppose that two firms produce differentiated products and compete in prices. as in class, the two firms are located at two ends of a line one mile apart. consumers are evenly distributed along the line. the firms have identical marginal cost, $60. firm b produces a product with value $110 to consumers.firm a (located at 0 on the unit line) produces a higher quality product with value $120 to consumers. the cost of travel are directly related to the distance a consumer travels to purchase a good. if a consumerhas to travel a mile to purchase a good, the incur a cost of $20. if they have to travel x fraction of a mile, they incur a cost of $20x. (a) write down the expressions for how much a consumer at location d would value the products sold by firms a and b, if they set prices p_{a} and p_{b} ? (b) based on your expressions in (a), how much will be demanded from each firm if prices p_{a} and p_{b} are set? (c) what are the nash equilibrium prices?