In July 2018 Mothercare PLC announced to the market that it was seeking to raise funds from a placing and open offer of new shares to existing shareholders.

d) Assume that Mothercare PLC has 4m shares in issue, with a current market value of 1200p per share, and was looking to raise 3.6m to fund an expansion of existing operating facilities on a 1 for 4 basis. i. Calculate how many shares that Mothercare will issue. [2 marks] ii. Calculate the rights price. [5 marks] iii. Calculate the theoretical ex-rights price. [8 marks] iv. Calculate the value of the right. [5 marks] v. Show that shareholder wealth is unaffected if the rights are taken up or sold. [10 marks] e) Define the rights issue paradox. [5 marks] f) Outline the issues with pre-emption rights as discussed by Myners and summarise his recommendations.