Question: Construct a simple example to show the following: a. Existing shareholders are made worse off when a company makes a cash offer of new stock

Construct a simple example to show the following:

a. Existing shareholders are made worse off when a company makes a cash offer of new stock below the market price.

b. Existing shareholders are not made worse off when a company makes a rights issue of new stock below the market price even if the new stockholders do not wish to take up their rights.

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