Motorhed Inc is currently trading at $10 per share with 2.1 billion shares on issue. It announces a 2 for 5 renounceable rights issue with a subscription price of $8.8 per share. XYZ Superannuation owns 2% of Motorhed. One of the directors of the super fund suggests that XYZ should exercise the rights. However, the Chairman of the super fund suggests that instead of exercising the rights, they should sell the rights and keep the sales proceeds. Assume that all rights offered by Motorhed (to all shareholders) are exercised and ignore other factors. Which of the following statements best describes the change to XYZ's wealth and its voting power if instead of exercising the rights, it follows the Chairman's suggestion? O As discussed in the lecture, both XYZ Superannuation's wealth and voting power will remain the same. O XYZ Superannuation's wealth will be reduced by $14.40 million, whereas its voting power will remain the same. O XYZ Superannuation's wealth will be reduced by $14.40 million, and its voting power will be reduced by 0.571%. O XYZ Superannuation's wealth will remain the same, whereas its voting power will decrease by 0.375%. None of the other statements is correct.

Motorhed Inc is currently trading at $10 per share with 2.1 billion shares on issue. It announces a 2 for 5 renounceable rights issue with a subscription price of $8.8 per share. XYZ Superannuation owns 2% of Motorhed. One of the directors of the super fund suggests that XYZ should exercise the rights. However, the Chairman of the super fund suggests that instead of exercising the rights, they should sell the rights and keep the sales proceeds. Assume that all rights offered by Motorhed (to all shareholders) are exercised and ignore other factors. Which of the following statements best describes the change to XYZ's wealth and its voting power if instead of exercising the rights, it follows the Chairman's suggestion? O As discussed in the lecture, both XYZ Superannuation's wealth and voting power will remain the same. O XYZ Superannuation's wealth will be reduced by $14.40 million, whereas its voting power will remain the same. O XYZ Superannuation's wealth will be reduced by $14.40 million, and its voting power will be reduced by 0.571%. O XYZ Superannuation's wealth will remain the same, whereas its voting power will decrease by 0.375%. None of the other statements is correct.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 12P

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Motorhed Inc is currently trading at $8 per share with 2.5 billion shares on issue. It announces a 2 for 7 renounceable rights issue with a subscription price of $6 per share. XYZ Superannuation owns 2% of Motorhed. One of the directors of the super fund suggests that XYZ should exercise the rights. However, the Chairman of the super fund suggests that instead of exercising the rights, they should sell the rights and keep the sales proceeds. Assume that all rights offered by Motorhed (to all shareholders) are exercised and ignore other factors. Which of the following statements best describes the change to XYZ’s wealth and its voting power if instead of exercising the rights, it follows the Chairman’s suggestion? -XYZ Superannuation’s wealth will remain the same, whereas its voting power will decrease by 0.645%. -XYZ Superannuation’s wealth will be reduced by $22.22 million, whereas its voting power will remain the same. -As discussed in the lecture, both XYZ Superannuation’s wealth…
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