Firm TTT needs to raise 5 million to pay for expanding its business to a new territory Thailand. It will raise the funds by offering 500,000 rights, each of which entitles the owner to buy one new share. The company currently has 2 million shares outstanding priced at 20 each.

1. What must be the subscription price on the rights to buy one new share the company plans to offer? [2 marks]

2. What will be the share price after the rights issue? [5 marks]

3. What is the value of a right to buy one new share? [2 marks]

4. How many rights would be issued to an investor who currently owns 1,000 shares? [3 marks]

5. Show that the investor who currently holds 1,000 shares is unaffected by the rights issue if she exercises the right, that is, that the value of her position before and after the rights issue is the same. [5 marks]

6. List and briefly explain 4 advantages and 4 disadvantages of being a public listed company. [8 marks]