FUND.OF CORP.FIN.(LL)-W/ACCESS >CUSTOM<
11th Edition
ISBN: 9781260100259
Author: Ross
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 14QP
Summary Introduction
To find: The amount that Person X obtains by selling his rights
Introduction:
The public issue of securities in which the securities are generally at an initial stage offered to the owners or the existing shareholders of the company is a right offer.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Mf6.
Goldman Sachs is underwriting instacart's IPO, They have estimated the market is willing to purchase 322 million shares of instacart at a price of 68 per share Goldman offers Instacart the choice of either a firm commitment with a price of $43 and a spread of $1.10, or a best efforts with a commission of $4.77 per share. How many shares does Instacart need to sell to prefer the best efforts offering? Note Answer in millions, report two decimal places.
Farah’s Fine Fashions (FFF) is considering raising money through a rights offering. FFF currently has 10 million shares outstanding selling for $22 per share. Current shareholders will receive one right per share. Five rights are required to buy one share for $20. Will the rights be exercised and if so, what is FFF’s new market value if all rights are exercised?
Select one:
a.
The rights will not be exercised.
b.
$220 million
c.
$260 million
d.
$321 million
e.
None of the above.
A5 3e
QRS N-Queries Company has an exciting new project that will cost $10,000,000. The company proposes to finance this project by issuing new shares with a rights offering. Currently, the company has 2,000,000 shares outstanding, each valued in the financial market at $30. With the rights offering, shareholders will be able to purchase one new share for a subscription price of $10.
e. What is the ex-rights price for each share, Me?
Chapter 15 Solutions
FUND.OF CORP.FIN.(LL)-W/ACCESS >CUSTOM<
Ch. 15.1 - Prob. 15.1ACQCh. 15.1 - Prob. 15.1BCQCh. 15.2 - What are the basic procedures in selling a new...Ch. 15.2 - What is a registration statement?Ch. 15.3 - Prob. 15.3ACQCh. 15.3 - Why is an initial public offering necessarily a...Ch. 15.4 - Prob. 15.4ACQCh. 15.4 - Prob. 15.4BCQCh. 15.5 - Prob. 15.5ACQCh. 15.5 - Suppose a stockbroker calls you up out of the blue...
Ch. 15.6 - What are some possible reasons why the price of...Ch. 15.6 - Explain why we might expect a firm with a positive...Ch. 15.7 - What are the different costs associated with...Ch. 15.7 - What lessons do we learn from studying issue...Ch. 15.8 - Prob. 15.8ACQCh. 15.8 - What questions must financial managers answer in a...Ch. 15.8 - Prob. 15.8CCQCh. 15.8 - When does a rights offering affect the value of a...Ch. 15.8 - Prob. 15.8ECQCh. 15.9 - What are the different kinds of dilution?Ch. 15.9 - Is dilution important?Ch. 15.10 - What is the difference between private and public...Ch. 15.10 - Prob. 15.10BCQCh. 15.11 - What is shelf registration?Ch. 15.11 - Prob. 15.11BCQCh. 15 - Prob. 15.1CTFCh. 15 - Smythe Enterprises is issuing securities under...Ch. 15 - Prob. 15.4CTFCh. 15 - Prob. 15.7CTFCh. 15 - Debt versus Equity Offering Size [LO2] In the...Ch. 15 - Debt versus Equity Flotation Costs [LO2] Why are...Ch. 15 - Bond Ratings and Flotation Costs [LO2] Why do...Ch. 15 - Underpricing in Debt Offerings [LO2] Why is...Ch. 15 - Prob. 5CRCTCh. 15 - Prob. 6CRCTCh. 15 - Prob. 7CRCTCh. 15 - Prob. 8CRCTCh. 15 - Prob. 9CRCTCh. 15 - Prob. 10CRCTCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Rights [LO4] Red Shoe Co. has concluded that...Ch. 15 - Prob. 4QPCh. 15 - Calculating Flotation Costs [LO3] The Valhalla...Ch. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Dilution [LO3] Eaton, Inc., wishes to expand its...Ch. 15 - Prob. 10QPCh. 15 - Dilution [LO3] In the previous problem, what would...Ch. 15 - Prob. 12QPCh. 15 - Value of a Right [LO4] Show that the value of a...Ch. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 1MCh. 15 - Prob. 2MCh. 15 - Prob. 3MCh. 15 - Prob. 4M
Knowledge Booster
Similar questions
- A5 3f QRS N-Queries Company has an exciting new project that will cost $10,000,000. The company proposes to finance this project by issuing new shares with a rights offering. Currently, the company has 2,000,000 shares outstanding, each valued in the financial market at $30. With the rights offering, shareholders will be able to purchase one new share for a subscription price of $10. f. What is the value of a right after the ex-rights date, Re?arrow_forwardA5 3c QRS N-Queries Company has an exciting new project that will cost $10,000,000. The company proposes to finance this project by issuing new shares with a rights offering. Currently, the company has 2,000,000 shares outstanding, each valued in the financial market at $30. With the rights offering, shareholders will be able to purchase one new share for a subscription price of $10. c. How many rights will be required to buy one new share, N?arrow_forwardA3)  Time remaining: 00:09:42 Finance Smartworks is considering a potential buyout of Redwords. The manager of Smartworks believes that the value of Redwords will rise by 50% if Smartworks purchases Redwords and changes its management. Redwords is a listed company with 10 million shares outstanding, and its share price is only $15 per share now. Smartworks is going to use a leveraged buyout with an offer of $20 per share to control Redwords. If Smartworks obtains 100% control of Redwords, the share price of Redwords after the leveraged buyout will be closest to: a. $1.00. b. $15.00. c. $20.00. d. $3.00.arrow_forward
- A5 3a QRS N-Queries Company has an exciting new project that will cost $10,000,000. The company proposes to finance this project by issuing new shares with a rights offering. Currently, the company has 2,000,000 shares outstanding, each valued in the financial market at $30. With the rights offering, shareholders will be able to purchase one new share for a subscription price of $10. a. What is the rights-on price for each share, M0?arrow_forwardA5 3b QRS N-Queries Company has an exciting new project that will cost $10,000,000. The company proposes to finance this project by issuing new shares with a rights offering. Currently, the company has 2,000,000 shares outstanding, each valued in the financial market at $30. With the rights offering, shareholders will be able to purchase one new share for a subscription price of $10. b. How many new shares will be issued?arrow_forwardFarah’s Fine Fashions (FFF) is considering raising money through a rights offering. FFF currently has 10 million shares outstanding selling for $22 per share. Current shareholders will receive one right per share. Four rights are required to buy one share for $20. Will the rights be exercised and if so, how much money will FFF raise if all rights are exercised? Select one: a. The rights will not be exercised. b. $4 million c. $40 million d. $50 million e. None of the above.arrow_forward
- 5 Dye Industries currently uses no debt, but its new CFO is considering changing the capital structure to 40.0% debt (wd) by issuing bonds and using the proceeds to repurchase and retire common shares so the percentage of common equity in the capital structure (wc) = 1 – wd. Given the data shown below, by how much would this recapitalization change the firm's cost of equity, i.e., what is rL - rU?Risk-free rate, rRF 6.00% Tax rate, T 30%Market risk premium, RPM 4.00% Current wd 0%Current beta, bU 1.15 Target wd 40% Group of answer choices 1.66% 2.15% 2.23% 2.02% 2.45% 1.84%arrow_forwardQ.An all-equity company is considering borrowing $10,000,000 and using the borrowed funds to repurchase shares. The company's cost of equity is 9%. EBIT is expected to be $3,600,000 every year forever. Assume all available earnings are immediately distributed to common shareholders and all the M&M assumptions are satisfied. If the company proceeds with the capital restructing, what will be the value of the company according to M&M Proposition I without taxes?arrow_forward13.15 Calculating Flotation Costs Southern Alliance Company needs to raise $75 million to start a new project and will raise the money by selling new bonds. The company will generate no internal equity for the foreseeable future. The company has a target capital structure of 70 percent common stock, 5 percent preferred stock, and 25 percent debt. Flotation costs for issuing new common stock are 7 percent; for new preferred stock, 4 percent; and for new debt, 3 percent. What is the true initial cost figure the company should use when evaluating its project?arrow_forward
- A5 6e DEF Company is comparing three different capital structures. Plan A is an all-equity plan and would result in 1000 shares of stock. Plan B would result in 700 shares of stock and $13,500 in debt. Plan C would result in 800 shares of stock and $9000 in debt. The firm’s EBIT will be $10,000 per year until infinity. The interest rate on the debt is 12%. e. Ignoring taxes, what is the break-even EBIT that will cause the EPS on Plan B to be equal to the EPS on Plan C?arrow_forwardN7 Wail Inc. is currently a firm that has 2 million shares of stock outstanding with a market price of $25 a share and outstanding debt of $30 million. The debt interest rate is 10%. Its cost of equity is 17 percent and the tax rate is 35 percent. For some reason related to one of the controlling shareholders’ preference, the company wants to get rid of all its debt. After recapitalization, what is the cost of equity?arrow_forward02) Overnight Publishing Company(OPC) has $2.5 million in excess cash. The firm plans to use this cash either to retireall of its outstanding debt or to repurchase equity. The firm’s debt is held by oneinstitution that is willing to sell it back to OPC for $2.5 million. The institution will notcharge OPC any transaction costs. Once OPC becomes an all-equity firm, it will remain unlevered forever. If OPC does not retire the debt, the company will use the $2.5 million in cash to buy back some of its stock on the open market. Repurchasing stock also hasno transaction costs. The company will generate $1,300,000 of annual earnings beforeinterest and taxes in perpetuity regardless of its capital structure. The firm immediatelypays out all earnings as dividends at the end of each year. OPC is subject to a corporatetax rate of 35 percent, and the required rate of return on the firm’s unlevered equity is20 percent. The personal tax rate on interest income is 25 percent, and there are no taxeson…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
