A business has in existence 4m ordinary £1 shares whose current market price is £1.80 each.

It wishes to raise £1.2m by a rights issue at £1.50 per share. The number of shares to be issued will be £1.2m/£1.5, that is, 800 000 shares. These will, therefore, be offered on a 1-for-5 basis to existing ordinary shareholders. For example, a shareholder owning 200 shares will be given the right to buy an additional 40 shares.