Alumina Limited has a share price of $2.82. The company has made a renounceable rights issue offer to shareholders. The offer is a three-for-ten pro-rata issue of ordinary shares at $2.60 per share.

a. Explain the effect of the offer being renounceable.

b. What is the price of the right?

c. Calculate the theoretical ex-rights share price.

d. Explain why an actual ex-rights price of a share may at times differ from the calculated theoretical price.