Discuss the merits and problems of the pre-emption right for UK companies

(a) What will the ex-rights price be?

(b) How many old ordinary shares were in circulation prior to the rights issue?

(c) Patrick owns 9,000 shares and is unable to find the cash necessary to buy the rights shares. Reassure ) Patrick that he will not lose value. How much might he receive from the company?

(d) What is the value of a right on one old share?

(e) What do the terms cum-rights and ex-rights mean?

(f) Advise Mahogany on the virtues of a deep-discounted rights issue.