Question #3. Polecat plc has 18 million $0.50 ordinary shares in issue. The current stock market value of these is $1.70 per share. The directors have decided to make a one-for-three rights issue at...

Question #3. Polecat plc has 18 million $0.50 ordinary shares in issue. The current stock market
value of these is $1.70 per share. The directors have decided to make a one-for-three
rights issue at $1.25 each. Julie owns 3,000 Polecat ordinary shares.
Assuming that the rights issue will be the only influence on the share price:
(a) What, in theory, will be the ex-rights price of the shares (that is, the price of the
shares once the rights issue has taken place)?