Maloney Industries is an international company which is seeking to raise $$60$ million to establish a new production plant in the eastern region of Germany. The company usually evaluates its investments using the net present value $($NPV$)$ method, but the CFO is not too sure what cost of capital to use in the discounting process for this particular project evaluation as the project would result in significant change in the company's systematic risk level. The CFO has compiled the following information to calculate Maloney's weighted average cost of capital:

The current risk$-$free rate is $4\mathrm{.}5\%$ and the market return is $10\mathrm{.}2\%.$

Maloney Industries' corporate tax rate is $38$ percent.

Maloney intends to maintain its target debt$-$to$-$equity ratio of $0\mathrm{.}7.$

Maloney recently issued a $10$ year $6\mathrm{.}75\%$ bond which sold at par on the market.

The estimated equity beta of the main German competitor in the same industry as the new proposed plant in the eastern region of Germany is $1\mathrm{.}07$ and the competitor has a market capitalization of $$7,000$ million and net debt of $$7,900$ million. The competitor pays corporate tax at a rate $30\mathrm{.}5\%.$

Maloney fndustries is considering using a rights offer to finance the $$60$ million investment in its new production plant. The company has detemuned that the ex$-$rights price would be $$52.$ The current price is $$55$ per share, and there are $5$ million shares outstanding.

Required:

$$ Estimate the weighted average cost of capital that the company should use as the discow$1$t rate for its proposed investment in eastern GermaJ$1$y$.$

$$ What would be the subscription price for the rights offer?

$$ Distinguish between weak form, semi$-$strong form and strong form stock maxket efficiency, and discuss how the maxket would react after the rights issue is made public if the market is shown to be semi$-$strong form efficient.