Question 1 (12 Marks) a. (4 Marks) Your company wants to raise $9.5 M (after paying a 5% underwriters fee) by a rights offering with a subscription price (S) of $25/sh. Calculate the value of 1 right if the current share price is $40/sh, and there are 2 million shares currently outstanding b. (4 Marks) Show that a shareholder with 5 shares of stock is indifferent to selling the rights or exercising them if the share price is $50 just before the ex-rights date. Hint, recalculate the value of the right c. (2 Marks) Calculate the percentage increase in the rights between (a) and (b) and compare that to the percentage increase in the stock price. d. (2 Marks) If the rights on share price in (a) of $40 is normally distributed with a mean of $38 and a standard deviation of $20, calculate the probability of a failed issue