1. You own 500 shares of common stock in a firm that has 5 million shares outstanding. The firm announces a plan to sell an additional 500,000 shares through a rights offering.

a) How many rights to purchase new shares will you receive?

b) Suppose that the market price per share is $40, but each right allows you to purchase a share of stock for $37. What should be the value of one right?

c) If you sold your rights how much money should you make?