Consider a fully-underwritten 4 for 5 rights issue made by company MNP. (a) Suppose the opening price

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Consider a fully-underwritten 4 for 5 rights issue made by company MNP.

(a) Suppose the opening price of stock MNP on the first day of ex-rights trading is $12.50 per share and the rights issue (subscription) price is $9.00. Compute the last rights-on price in the stock on the assumption that overnight market sentiment is flat (i.e., the market index remains unchanged between the close in the last rights- on date and the open of the following ex-rights date).

(b) Suppose that prior to the rights issue, CNTR held 45 percent of MNP’s total ordinary voting stock. There are 3,000 million shares outstanding in MNP before rights issue, with investor SUBST1 holding 360 million shares and SUBST2 holding 390 million shares. This situation leaves a public float of 30 percent (= 900 million shares). In respect of SUBST2, assume the following:

• It takes-up its full “approved entitlement” of shares under the rights issue;

• It receives 3 million shares from an excess rights application; and

• It acquires 20 million nil-paid rights (NPRs), but exercises only three-quarters of this number (i.e., the remaining 5 million NPRs acquired are sold-on by SUBST2 just prior to the end of trading in the organized NPR market). Compute SUBST2’s percentage equity holding in MNP just after rights issue completion (Round your answer to 2 decimal places).