ABC Inc currently has 500,000 shares outstanding at $44 each. The company is proposing a rights offering with subscription price set at $35. Shareholders will need to have four rights to exercise their right to buy each new share.

I. What is the new market value of the company after the rights issue?

II. What is the value of each right? What is the ex-rights price of shares?

III. ABC managers want the ex-rights price to be $42.80. What should the subscription price be to ensure the desired ex-rights price?

IV. Why is ABC Inc having a rights offer than a general cash offer to raise new funds?