Cayuga Corporation is planning to raise $70 million through the sale of new common stock under a rights offering. The su

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Cayuga Corporation is planning to raise $70 million through the
sale of new common stock under a rights offering. The subscription
price is $70 per share. The stock currently sells for $80 per
share, rights on (i.e., it is before the ex-rights date). Total
outstanding shares equal 10 million before the issue. Of this
amount, Ali Cokbilir owns 100,000 shares. a. How many new shares
will the company issue? b. How many rights are needed to purchase
on new share? c. What will be the total value of Ali’s rights a day
before the ex-rights date, assuming that the market price of Cayuga
stock remains at $80 per share? d. Suppose that the rights are
selling at a price of $1.00. Is there any arbitrage opportunity?
What type of strategy should Ali follow if the market price of
Cayuga stock remains at $80 per share