23. Rights issues (S14.3) In 2012, the Pandora Box Company made a rights issue at €5 a share of one new share for every four shares held. Before the issue there were 10 million shares outstanding and the share price was €6.

a. What was the total amount of new money raised?

b. The rights issue gave the shareholder the opportunity to buy one new share for less than the market price. What was the value of this opportunity?

428 Part Four Financing Decisions and Market Efficiency

c. What was the prospective stock price after the issue?

d. How far could the total value of the company fall before shareholders would be unwilling to take up their rights?