Brag plc is raising finance through a rights issue and the current ex dividend market price of its shares is 3.00. The rights issue is on a 1 for 6 basis and the new shares will be offered at a 20% discount to the current marker price.

1) discuss the relative merits of the following ways of raising new equity finance:

a. A placing;

b. A public offering

2) explain why in general, rights issues are priced at a discount to the prevailing market price of the share.

3) calculate the theoretical ex rights share price of brag plc and the value of the rights per share using the above information.

4) discuss the factors that determine whether the actual ex rights share price is the same as the theoretical ex rights price.