Your firm has 10 million shares outstanding currently priced at $40 a share. There is no debt. The firm wishes to raise $15 million through a rights-issue with subscription price of $15.

a) How many rights would be needed to buy a new share?

b) What is the total value of the firm before and after the rights-issue?

c) What is the total number of shares after rights-issue?

d) What is the share price after the issue (the ex-rights price)?

e) What is the price of one right? f) (3 points) What would be the total market value of the firm if it decides to raise the new capital ($15 million) through perpetual debt (instead of a rights-issue)? Assume corporate tax rate is 35%.