DGW Plc is looking to raise 36m to fund the purchase of its competitor, DL Plc. DGW Plc has 40m shares in issues, and the current market value of shares is 120 per share. The directors of DGW Plc have decided on a 1 for 4 rights issue.

1. Calculate the ex-rights price
2. Calculate the value of the right.
3. Show that shareholder wealth is unaffected regardless of whether rights are taken up or not.