FUND OF CORPORATE FINANCE LL W/ACCESS
11th Edition
ISBN: 9781260076752
Author: Ross
Publisher: MCG
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Question
Chapter 15.8, Problem 15.8ECQ
Summary Introduction
To think critically about: Whether the rights offering leads to a decrease in the share price and how the existing shareholders are affected by the rights offering.
Introduction:
The issue of the common stock to the present shareholder of the company is termed as rights offering. The rights offering is also known as the privileged subscription.
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Students have asked these similar questions
Critically discuss this statement, do you agree with it?
"Although a rights issue allows shareholders to purchase shares below market value, it may not increase shareholder value"
Why may a company wish to reduce its Share Capital?
Which of the following statement about a rights issue is correct?
a. The share price can be expected to increase on the ex-rights date
b. On the ex-rights date the rights separate from the share
c. The subscription price is usually greater than the market price
d. A rights issue is offered to an investor whether they are an existing shareholder or not
e. If you buy shares cum-rights you are not entitled to participate in the rights issue
Chapter 15 Solutions
FUND OF CORPORATE FINANCE LL W/ACCESS
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
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Similar questions
- what is the firm’s cost of preferred stock and cost of a new issue of common stock? Which of the two sources offers a lower cost?arrow_forwardWhat is a share repurchase? When a company buys back its own shares at IPO prices When a company buys back its own shares at market prices When a company buys shares of its competitors, driving prices downarrow_forwardHow are shares issued at full market value treated differently from rights issues? Explain why it is?arrow_forward
- Write down what are the disadvantages of shareholders equity?arrow_forwardWhat is the effect of a company electing the fair value option with respect to an investment that otherwise would be accounted for using the equity method?arrow_forwardIs it repurchase shares good for growth company, that does not pay dividends, and have undervalued stock, and have a future investment opportunities? or should maintain its liquidity to fund its investment rather than repurchase shares?arrow_forward
- A rights offering that gives existing target shareholders the right to buy shares in either the target or the acquirer at a deeply discounted price once certain conditions are met is called a:arrow_forwardBUFFET'S REASON FOR PREFERRING SHARE REPURCHASES VALID? IS A "HOMEMADE DIVIDEND" A VIABLE ALTERNATIVE TO CASH DIVIDENDS FOR THE INVESTOR?arrow_forwardwhy would investors prefer to invest in a company with a regular divided policy than a company with a low regular and extra dividend policy?arrow_forward
- Do you think the partial equity method is the best choice of methods to use for every companies situation? If not, what situation would a compnay be in to want to choose the equity method or initial value method over the partial equity method?arrow_forwardWhy is the cost of retained earnings cheaper than the cost of issuing new common stock? Group of answer choices Issuing new common stock may send a negative signal to the capital markets, which may depress the stock price. When a company issues new common stock they also have to pay flotation costs to the underwriter. Either Neitherarrow_forwardHow is it possible for an employee stock option to be valuable even if the firms stock price fails to meet shareholders expectations?arrow_forward
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