Drumlin Co has $5m of $0·50 nominal value ordinary shares in issue. It recently announced a 1 for 4 rights issue at $6 per share. Its share price on the announcement of the rights issue was $8 per share.

What is the theoretical value of a right per existing share?

A. $1·60
B. $0·40
C. $0·50
D. $1·50