Answer any ONE question from this section. 2. You own 10,000 ordinary shares, with face value 20 pence, in a local firm. The firm needs to raise more equity to pay for this year's promised bonuses and have decided to use a rights issue to achieve this. The offer is 2 new ordinary shares for every 25 currently owned at a price of 1.65 each. The market price of an ordinary share just before the rights issue closing date is 1.95. (a) What is the ex-rights price per share? (10 marks) (b) What is the value of the right to buy a share? (10 marks) (c) You are considering what to do with your rights. (i) If you exercise your rights, what will be your net wealth? (10 marks) (ii) If you sell all your rights, what will be your net wealth? (10 marks) (iii) If you let your rights lapse, what will be your net wealth? (10 marks) (iv) What is your decision on the basis of the above three options? (5 marks) (d) If you decide to sell enough rights to pay for the take up of the remaining rights, how many shares will you own after the rights issue? (20 marks) Please show how you work out your answers to the above questions. (e) Compare and contrast the main factors that firms must consider when using rights issues and public issues to raise new equity finance for businesses. (within a 120-word limit) (25 marks) (Total 100 marks)