Assume Technical Investors is thinking about three different size offerings for issuance of additional shares. What is the percentage underwriting spread for each size offer? Size of Offer: Public Price: Net to Corporation: A: 1.1 million $30 $27.50 B: 7.0 million $30 $28.44 C: 28.0 million $30 $29.15

Assume Technical Investors is thinking about three different size offerings for issuance of additional shares. What is the percentage underwriting spread for each size offer? Size of Offer: Public Price: Net to Corporation: A: 1.1 million $30 $27.50 B: 7.0 million $30 $28.44 C: 28.0 million $30 $29.15

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 4EP

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Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?
Stock Split Suppose you own 2,000 common shares of Laurence Incorporated. The EPS is $10.00, the DPS is $3.00, and the stock sells for $80 per share. Laurence announces a 2-for-1 split. Immediately after the split, how many shares will you have, what will the adjusted EPS and DPS be, and what would you expect the stock price to be?
Alert Companys shareholders equity prior to any of the following events is as follows: The company is considering the following alternative items: 1. An 8% stock dividend on the common stock when it is selling for 30 per share. 2. A 30% stock dividend on the common stock when it is selling for 32 per share. 3. A special stock dividend to common shareholders consisting of 1 share of preferred stock for every 100 shares of common stock. The preferred stock and common stock are selling for 123 and 31 per share, respectively. 4. A 2-for-1 stock split on the common stock, reducing the par value to 5 per share (assume the same date for declaration and issuance). The market price is 30 per share on the common stock. 5. A property dividend to common shareholders consisting of 100 bonds issued by West Company. These bonds are carried on the Alert Company books as an available-for sale investment at a fair value of 48,000 (which is also its cost); it has a current value of 54,000. 6. A cash dividend, consisting of a normal dividend and a liquidating dividend, on both the preferred and the common stock. The 10% preferred dividend includes a 2% liquidating dividend, and the 2.30 per share common dividend includes a 0.30 per share liquidating dividend (separate liquidating dividend contra accounts should be used). Required: For each of the preceding alternative items: 1. Record (a) the journal entry at the date of declaration and (b) the journal entry at the date of issuance. 2. Compute the balances in the shareholders equity accounts immediately after the issuance (any gains or losses are to be reflected in the retained earnings balance; ignore income taxes).
#2: XYZ Corporation is evaluating an extra dividend versus a share repurchase. In either case, $14,500 would be spent. Current earnings are $1.65 per share, and the stock currently sells for $58 per share. There are 2,000 shares outstanding. a) Evaluate the two alternatives in terms of the effect on the price per share of the stock and shareholder wealth per share. b) What will the company's EPS and P/E ratio be under the two different scenarios?
A firm is making an initial public offering. The investment bankers agree to a firm-commitment underwriting for 480,000 shares that would be priced to the public at $33 per share. The underwriter’s spread is 6 percent. What will be the proceeds for the issuer and the underwriter?
A firm is making an initial public offering. The investment bankers agree to a firm-commitment underwriting for 420,000 shares that would be priced to the public at $38 per share. The underwriter’s spread is 6 percent. What will be the proceeds for the issuer and the underwriter? Proceeds for the issuer $ Proceeds for the underwriter $
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To record the foregoing transaction Choices; Ordinary Treasury Shares would be credited for P 30,000 Ordinary Treasury Share Premium would be credited for P 30,000 Ordinary Treasury Share Premium would be credited for P 10,000 Ordinary Share Capital would be credited for P 20,000.