Steel Plus is a manufacturing company and is currently looking to build a new factory to cater for the demand for their product. Cost of building the new factory would require minimum MVR 9 million.

The company is considering raising finance via 1 for 7 rights issue at 20% discount to the current market price of MVR 12 per share. Issue cost is estimated to be MVR 200,000 and will be paid from the proceeds of the rights issue. Steel plus currently have 7 million ordinary shares outstanding.

Required

(a) Mr. Afeef holds 5% of the shares of Steel Plus before the rights issue. What would be the value of the total shares post the rights issue (assuming the post issue share price is equal to the Theoratical Ex-rights Price) if Mr. Afeef took up the right

(b)briefly mention the main advantage of using a rights issue to raise finance.

Pls ASAP i hv 30 mins only. It will be appraised. Pls fast.