Overland Motor Organisation (OMO) has just made a 1 for 4 bonus issue to have 96 million shares on issue. It is now preparing to raise $36 million through a rights issue. The firm needs the funds to finance purchases of new mineral deposits. After public announcement, the share price steadied at about $7.00 per share. OMOs financial staff have proposed two plans plan As subscription price is $6 while plan Bs price is $3.00. Assuming both plans are successful. (Assume that one right can buy one new share).

a) Determine the number of shares issued under each plan. b) How many shares currently held will be required to purchase a new share? c) What should be the ex-rights price of the shares in each plan (this part can be done either before or after part d)? d) What should be the value of a right in each plan? e) Which plan is preferable? Why? f) Which plan would you recommend to OMO? Why?