MacKenzie Corporation currently has 9 million shares of stock outstanding at a price of $ 40 per share. The company would like to raise money and has announced a rights issue. Every existing shareholder will be sent one right per share of stock that he or she owns. The company plans to require five rights to purchase one share at a price of $ 40per share.

a. Assuming the rights issue issuccessful,how much money will itraise?

b. What will the share price be after the rightsissue?(Assume perfect capitalmarkets.)

Suppose instead that the firm changes the plan so that each right gives the holder the right to purchase one share at $ 6per share.

c. How much money will the new planraise?

d. What will the share price be after the rightsissue?

e. Which plan is better for thefirm'sshareholders? Which is more likely to raise the full amount ofcapital?