Question B2: (10 marks) Hard Yakka is planning a rights offer to raise $12 million in equity. The company currently has 3.8 million shares outstanding and a market capitalisation of equity of $75 million. Hard Yakka is still not sure how many rights will be required to purchase a share of new stock.

Hard Yakka is considering two options:

Option A: 4 rights for 1 share at $8

Option B: 5 rights for 1 share at $6

a) Calculate the ex-rights price of Hard Yakkas shares under Option A (2 marks)

b) Calculate the ex-rights price of Hard Yakkas shares under Option B (2 marks)

c) Calculate the theoretical value of each right under Option A (2 marks)

d) Calculate the theoretical value of each right under Option B (2 marks) e) Why is it unlikely that Hard Yakka will offer existing shareholders to buy new shares for the current market price? (2 marks)