The annual simple interest rate paid for the layaway plan, thinking of the fee as interest, if someone bought a $69 item on November 15 on layaway, with the final payment due on December 15, and that the retailer charged you a $5 service fee.

Question

FARO Technologies, whose products include portable 3D measurement equipment, recently had 26 million shares outstanding trading at $45 a share. Suppose the company announces its intention to raise $290 million by selling new shares. How large a loss in dollar terms will existing FARO shareholders experience on the announcement date, based on studies that show losses are 30% of the size of the new issue? Note: Enter your answer in millions without a sign. What percentage of the value of FARO’s existing equity prior to the announcement is this expected loss? Note: Round your answer to 1 decimal place. At what price should FARO expect its existing shares to sell immediately after the announcement? Note: Do not round intermediate calculations. Round your answer to 2 decimal places.

Answer 1

Question

Chapter 2.1, Problem 35E

To determine

To calculate: The annual simple interest rate paid for the layaway plan, thinking of the fee as interest, if someone bought a $69 item on November 15 on layaway, with the final payment due on December 15, and that the retailer charged you a $5 service fee.

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