Part-C Case-1. Aragon plc is an online pet-food business who is currently operating in United Kingdom and has been hugely successful in the last three years. Aragon plc is considering expanding its business in Europe and Japan by merging/acquiring local pet-food businesses. In order to finance this expansion, Aragon would require an investment of $22.50 million. Currently, Aragon has 8 million ordinary shares and has not issued any new shares in the period under review. The company is financed entirely by equity and its current market capitalization is $96 million. Aragon weighed different options to finance the investment need and finally settled with issuing right shares at a discount of 25% to the current share price. Required: 1. Calculate the theoretical ex - rights issue price per share and value of rights for the proposed rights issue. [10 Marks] 2. Calculate the market capitalization after the rights issue. [05 Marks] 3. Explain, in general, why rights issues are priced at a discount to the prevailing market price of the share. [05 Marks] 4. Briefly explain choices that Aragon's shareholders have regarding how they respond to the rights issue. [05 Marks]