UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Question
Chapter 20, Problem 8QP
Summary Introduction
To determine: The effect of the given alternative offering prices on the existing price per share.
Dilution:
Dilution is a process or action where the ownership percentage of a shareholder gets reduced due to the issue of new shares. As the number of outstanding shares gets increased, the par value of the company gets decreased.
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Students have asked these similar questions
Damron, Incorporated, has 205,000 shares of stock outstanding. Each share is worth $79, so the company’s market value of equity is $16,195,000. Suppose the firm issues 44,000 new shares at the following prices: $79, $73, and $67. What will be the ex-rights price and the effect of each of these alternative offering prices on the existing price per share? (Leave no cells blank; if there is no effect select "No change" from the dropdown and enter "0". Round your answers to 2 decimal places, e.g., 32.16.)
Damron, Incorporated, has 225,000 shares of stock outstanding. Each share is worth
$83, so the company's market value of equity is $18,675,000. Suppose the firm issues
52,000 new shares at the following prices: $83, $77, and $71. What will be the ex-rights
price and the effect of each of these alternative offering prices on the existing price per
share? (Leave no cells blank; if there is no effect select "No change" from the
dropdown and enter "0". Round your answers to 2 decimal places, e.g., 32.16.)
a. $83
b. $77
c. $71
Price Ex-Rights
Effect
Amount
per share
per share
per share
A company wants to raise $400 million in a new stock issue. Its investment banker indicates that the sale of new stock will require 5
percent underpricing and a 4 percent spread (Hint: the underpricing is 5 percent of the current stock price, and the spread is 4 percent
of the issue price)
a Assuming the company's stock price does not change from its current price of $65 per share, what would be the issue price to the
public after underpricing? How many shares would the company need to sell?
Note: Round intermediate calculations to 2 decimal places. Round your answers to 2 decimal places. Enter "Number of shares"
answer in millions.
4
Issue price
Number of shares
million
b. How much money will the investment banking syndicate earn on the sale?
Note: Round intermediate calculations to 2 decimal places. Enter your answer in millions rounded to 2 decimal places.
Investment bankers' revenue
million i
Chapter 20 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 20 - Prob. 1CQCh. 20 - Debt versus Equity Flotation Costs Why arc the...Ch. 20 - Prob. 3CQCh. 20 - Prob. 4CQCh. 20 - Prob. 5CQCh. 20 - Prob. 6CQCh. 20 - Prob. 7CQCh. 20 - Prob. 8CQCh. 20 - Prob. 9CQCh. 20 - IPO Pricing The following material represents the...
Ch. 20 - Competitive and Negotiated Offers What are the...Ch. 20 - Seasoned Equity Offers What are the possible...Ch. 20 - Prob. 13CQCh. 20 - Prob. 14CQCh. 20 - Prob. 15CQCh. 20 - Rights Offerings Chanelle, Inc., is proposing a...Ch. 20 - Prob. 2QPCh. 20 - Prob. 3QPCh. 20 - Prob. 4QPCh. 20 - Calculating Flotation Costs The St. Anger...Ch. 20 - Prob. 6QPCh. 20 - Calculating Flotation Costs The Green Hills Co....Ch. 20 - Prob. 8QPCh. 20 - Stock Offerings The Newton Company has 50,000...Ch. 20 - Dilution Teardrop, Inc., wishes to expand its...Ch. 20 - Dilution The all-equity firm Metallica Heavy Metal...Ch. 20 - Prob. 12QPCh. 20 - Prob. 13QPCh. 20 - Prob. 14QPCh. 20 - Prob. 15QPCh. 20 - Prob. 16QPCh. 20 - Prob. 17QPCh. 20 - Prob. 18QPCh. 20 - Prob. 1MCCh. 20 - Prob. 2MCCh. 20 - Prob. 3MCCh. 20 - Prob. 4MC
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