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AI Graphics Inc. announced they wanted to raise $10,000,000 in new financing through a rights offering, where one right would entitle the shareholder to 0.80

AI Graphics Inc. announced they wanted to raise $10,000,000 in new financing through a rights offering, where one right would entitle the shareholder to 0.80 of a right (not a typo). The firm has 2,000,000 shares outstanding, and the stock is currently selling for $66 rights-on. The subscription price will be $50.00 cash per share.

You own 3,500 shares in AI Graphics stock, and are wondering what to do.

1. What would be the value of one right ex-rights?

2. How many of the new shares could you buy if you exercised all your rights? How much additional cash would you need to exercise your rights?

3. Clearly summarize your options, including the advantages / disadvantages of each. Would one option leave you in a better financial position than the others? (Use proper sentence structure, grammar and spelling.)

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