CASE 1 - RIGHTS ISSUE (20 marks) Investors in ABC Plc have just received provisional allotment letters detailing the term of a rights issue intended to raise capital too pen its franchise in India and develop a new line of product in this market. The firm plans to raise a total of 185 million - of which 50 million by means of a placing, and the rest through the rights issue. Equity investors in the firm are entitled to two new share for every five existing shares held. The issue price for the new shares is 002 pence, and the market price of ABC ' s shares on receipt of the allotment letters was 2.23 pence. a) Calculate the theoretical ex-rights price of ABCPI shares b) Comment on whether we should expect the actual ex-rights price to equal the theoretical (3 marks) ex-rights price, c) Assume that the actual ex-rights price is equal to the theoretical ex-rights price. Show how an (7 marks) investor with 2 million shares in ABC Plc might trade the rights with the aim of holding the value of the equity investment in ABCPlc constant. (10 marks)