Hanging Valley plc has issued share capital of 2 million ordinary shares, par value c1.00. The board of the company has decided it needs to raise c1 million, net of issue costs, to finance a new product.

It has been suggested that the additional finance be raised by means of a 1 for 4 rights issue. The issue price will be at a 20 per cent discount to the current market price of c2.75 and issue costs are expected to be c50 000. Calculate and explain the following:

(i) the theoretical ex-rights price per share;

(ii) the net cash raised;

(iii) the value of the rights.