You are the CFO of a firm with a market cap of $1 billion, The firm has 100 million shares outstanding, trading at $10 per share, and you have announced a rights issue to raise $200 million at a subscription price of $6 / share.

a. How many rights should you issue? How many rights will the existing shareholders receive for every share he or she owns?

b. What is the ex-rights price and the value of a right?

c. Suppose you are holding 1,000 shares in the firm prior to the rights offering. You do not plan to subscribe to any new share and will sell all your rights on the market instead. What is the market value of your holdings after the rights offering? What is the cash flow you will receive from selling the rights?