A shareholder possesses 5,000 shares having a market value of Rs 50 per share and 10 rights are required to buy one new share. The subscription price is Rs 40. The ex-rights price of the share is Rs...

A shareholder possesses 5,000 shares having a market value of Rs 50 per share and 10 rights are required to buy one new share. The subscription price is Rs 40. The ex-rights price of the share is Rs 46 and the value of right is Rs 4. Find the current value of his original wealth under three options:

(a) he exercises his pre-emptive rights and subscribes to the additional shares within the date of record;

(b) he sells the additional shares; or

(c) he simply does nothing and the allotment expires.