The directors of CP Co are planning to raise additional finance through a 1-for-4 rights issues of shares in order to support the firm's expansion program. The current share price is K2.6 while the new shares will be offered at K2.1 per share. Currently, the firm's share capital is K9,800,000 with a par value of K0.50. The record date for the rights issue is 23rd of December 2017 while the effective date for issuing of shares to the qualifying shareholders is 10th of January 2018. Required: a) Briefly explain what a rights issue is and give reasons why rights issue shares are given at a discount [6 marks] b) Calculate the theoretical ex-rights price and the value of rights for new shares. [6 marks] c) Discuss the relative merits of a rights issue as a way of raising finance for expansion. [4 marks] d) Determine the effect of the rights issue on the wealth of an investor that current holds 24,000 shares assuming that the investor Sales 30% of the rights and takes up the balance. [4marks] [Total 20 marks]