Pandora Box Company Inc. makes a rights issue at a subscription price of $4 a share. One new share can be purchased for every two shares held. Before the issue there were 15 million shares outstanding and the share price was $5.

a. What is the total amount of new money raised? (Enter your answer in millions.)

b. What is the expected stock price after the rights are issued? (Round your answer to 4 decimal places.)

c. By what percentage would the total value of the company need to fall before shareholders would be unwilling to take up their rights? (Do not round intermediate calculations. Enter your answer as a positive percent rounded to 2 decimal places.)

d. Suppose that you initially own 400 shares plus $800 in the bank. If you take up your rights issue, what will be your total wealth after the issue is completed? (Do not round intermediate calculations.)

e. Suppose that the company now decides to issue the new stock at $2 instead of $4 a share. How many new shares would it have needed to raise the same sum of money? (Enter your answer in millions rounded to 1 decimal place.)

f. What is the expected stock price under this new arrangement after the rights are issued? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

g. If you take up your rights issue under this new arrangement, what will be the impact on your total wealth after the issue is completed? a. Your wealth will increase. b.Your wealth will decrease. c.Your wealth will not change.

h. Which arrangement makes you better off: the first, the second, or neither?

a)The first b)The second c)Both the first and second d)Neither