1. a) A company is raising funds for a new project by issuing new equity in a rights offer. Mr. Smith, one of the companys shareholders, decides to sell his rights. Which form of loss from dilution would Mr. Smith necessarily experience?

a. dilution of book value b. dilution of market value c. dilution of percentage ownership d. dilution of earnings per share e. none of the above

1. b) Direct long-term financing differs from a public debt issue in terms of

a. higher registration costs for direct financing. b. higher distribution costs for direct financing. c. more restrictive covenants for direct financing. d. higher negotiation costs during default for direct financing. e. higher interest rates in public debt issues.

Please provide explanation why so I know its the correct answer.