Gravenstein Chemicals makes a right issue at a subscription price of $5 a share. One new share can be purchased for every four shares held. Before the issue there were 8 million shares outstanding and the share are currently priced at $7.50.

(a)What is the total amount of new money raised?

(b)What is the total value of company after the issue?

(c)Calculate total number of shares after the right issue.

(d)What is the expected stock price after the rights are issued?

(e)Suppose that the company now decides to issue the new stock at $4 instead of $5 a share. How many new shares would the company issue to raise the same amount of money?

(f)What is the expected stock price under this new arrangement after the rights issued?