You were recently approached by Mrs Personally Worried a shareholder in Conerock Zambia plc for advice on her right to participate in the rights issues. Conerock Zambia has made a rights issue of 1 for 4 at K3. Conerock Zambia market share price before paying a dividend of 200 ngwee pay share is K8. Mrs Worried currently own 40000 shares in the company.

Mrs worried wants clarity on the following

1. Meaning of rights issue and reasons for making it (2 marks)
2. Theoretical ex-right share price ( Calculate and explain) (3 marks)
3. Value of rights (Calculate and explain) (3 marks)
4. Value of a right (Calculate and explain) (2 marks)
5. Explanation and calculation of her net worth after her participation in the rights issues given that she sells half her new shares to the public and a company has paid a dividend of 132 ngwee per share (5 marks)
6. Explain in detail the two functions of the capital market (10 marks)