ABC Co is currently considering raising $5 million through a rights issue. Its 1,000,000 shares are currently traded at $20 per share. Its issue manager, XYZ Ltd, has advised ABC to set the subscription price at $15. a) Do you think the subscription price should be lower or higher than the current stock price? b) What are the terms of the rights issue? i.e. how many new shares should be given for each old share? c) What is the theoretical ex-rights price? d) Are the existing shareholders better off subscribing to the rights issue？

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a The subscription price of 15 is lower than the current stock price of 20 per share This is common ... View the full answer