You are an institutional investor with a holding of 2 million shares in listed company Harmony Health Solution (HHS). HSS is undertaking a capital raising by way of a renounceable rights issue. These are the important figures for the HSS transaction:

Shares on issue: 240 million

Share Price: $4.37

Issue price of shares for rights issue: $4.10

1 for 6 issue

Calculate:

a) The TERP and Rights Price

Your boss has suggested that instead of taking up all of your rights, you should sell some and use the income generated to exercise your residual holding. Calculate:

b) The number of rights that you will sell and the number of shares you will buy, given that you require the income received from selling some of your rights to exactly match the money you will spend acquiring new shares under the offer with your unsold rights.

c) Using your answer to b) show the value of your holding in HHS after the transaction.