19 Rights Offering Faff plc has announced a rights issue to raise £50 million for a new journal, the Journal of Financial Excess. This journal will review potential articles after the author pays a non-refundable reviewing fee of £5,000 per page. The equity currently sells for £40 per share, and there are 5.2 million shares outstanding.

(a) What is the maximum possible subscription price? What is the minimum?

(b) If the subscription price is set at £35 per share, how many shares must be sold? How many rights will it take to buy one share?

(c) What is the ex-rights price? What is the value of a right?

(d) Show how a shareholder with 1,000 shares before the offering and no desire (or money) to buy additional shares is not harmed by the rights offer.