Howards Ltd wishes to raise R100 million through a rights issue. The funds are required to fund newly developed ground-breaking medical technology. Howards Ltd has 100 million shares in issue which currently trade at R2.50 per share. Fred Howards, the company secretary, has suggested a subscription price for the shares of R2.20 under PLAN X or R1.80 under PLAN Y. You are unsure which plan to choose.

a) How many shares is a shareholder required to hold to purchase a new share under either plan?

b) Calculate how many shares are issued under both plans.

c) Under each plan, what is the ex-rights price? (3) d) What is the value of a right under PLAN X and PLAN Y?

e) From the companys point of view which plan is preferable? Explain your answer.

f) Which plan would you recommend? Explain your answer.

g) Would it be smart to ask shareholders for a subscription price of R3 per share? Explain your answer.