The Lets Publish Corporation has announced a rights offer to raise 25 million for a new journal. This journal will review potential articles after the author pays a non- refundable reviewing fee of 5,000 per page. The stock currently sells for 48 per share and there are 2.7 million shares outstanding.

If the subscription price is set at 41 per share, how many shares must be sold? How many rights will it take to buy one share? Explain your calculations carefully. [4%]

What is the ex-rights price? What is the value of a right? Explain your calculations carefully.

A shareholder with 1,000 shares before the offering has no desire (or money) to buy additional shares offered as rights. What is his portfolio value before and after the rights offer? Explain your calculations carefully.

Your friend is thinking to start a business and would like your advice on whether she should form the business as a sole proprietorship or a corporation. Give your best advice to your friend, carefully explaining the implications under each form of business organisation.