Hanging Valley plc has issued share capital of 2m ordinary shares, nominal value £1.00.

The board of the company has decided it needs to raise £1m, net of issue costs, to finance a new product and a 1 for 4 rights issue has been suggested. The issue price will be at a 20 per cent discount to the current market price of £2.75 and issue costs will be £50,000.

Calculate and explain the following:

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

(ii) the net cash raised;

(iii) the value of the rights.