You have been asked for advice on a rights offering by a firm with 10 million shares outstanding trading at $50 per share. The firm needs to raise $100 million in new equity. Assuming that the rights subscription price is $25, answer the following questions.

a. How many rights would be needed to buy one share at the subscription price?

b. Assuming that all rights are subscribed to, what will the ex-rights price be?

c. Estimate the value per right.

d. If the price of a right were different (higher or lower) than the value estimated in c, how would you exploit the difference?