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A Company has 400,000 shares in issue with a current market price of RM 4 each. It announces an increase in share capital to be

A Company has 400,000 shares in issue with a current market price of RM 4 each.

It announces an increase in share capital to be achieved by a rights issue of one new share for every four existing shares. The rights price is RM3 per new share, thus raising RM300,000 for investment in the new project.

(i) Calculate the theoretical ex rights price.

(ii) Calculate the value of the right to subscribe for each new share.

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