Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Question

Want to see the full answer?

Answer 1

Question

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

You are the CFO of a company that has a market capitalization of $20 billion. The firm has 50 million shares outstanding, so the shares are trading at $400 per share. You need to raise $1 billion and have announced a rights issue. Each existing shareholder is sent one right for every share he or she owns. You have not decided how many rights you will require to purchase a share of new stock. You will require either 16 rights to purchase one share at a price of $320 per share, or 30 rights to purchase two new shares at a price of $300 per share. a)How much money is raised under 2 approaches? b)What are the new stock prices after the issuance (under 2 approaches) c)Will the existing shareholders exercise their rights to participate in the SEO? Justify your answer d) What is the dollar value of one issuance right for a shareholder who owns a single share of stock e) are the shareholders expected to be worse off with, better off with, or indifferent to the 2 approaches? Justify your answer

Borg Security Systems is considering the sale of 12,000 shares of stock to finance development of a new security product. The firm has 40,000 shares of common stock outstanding, par value of $1.00 per share. The firm has $60,000 in additional paid-in capital and $80,000 in retained earnings. Borg's investment bankers estimate that new shares will bring in $5.15 per share. If Borg goes ahead with the new stock issue, what will be the change in book value per share? Group of answer choices −$1.00 +$0.15 +$0.56 +$1.00 $0

The Beranek Company, whose stock price is now $20, needs to raise $30 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $16 per share because of signaling effects. The underwriters' compensation will be 4% of the issue price, so Beranek will net $15.36 per share. The firm will also incur expenses in the amount of $190,000. How many shares must the firm sell to net $30 million after underwriting and flotation expenses? Do not round intermediate calculations. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest whole number.

Answer 2

Question

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 5

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 6

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 7

Chapter 28, Problem 16P

a.

Summary Introduction

Determine how many new shares will be issued by BAD Company and at what price, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding and an acquiring company believes that the company’s value can be increased, if the management is replaced. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 8

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 9

b.

Summary Introduction

Determine what will happen to the percentage of ownership of BAD Company by the acquirer company, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 10

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 11

Summary Introduction

Determine what will happen to the price of shares of BAD Company, despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 12

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 13

d.

Summary Introduction

Determine whether the acquirer company loses or gains from triggering the poison pill. In case there is a loss, where does the loss go and in case there is a gain, who gains and how. Given that despite the BAD Company’s management resisting the buyout attempt, the acquirer company’s purchase crosses the 20% threshold of ownership, given that BAD Company’s stock price is $20 and the firm has 2 million shares outstanding. The BAD Company has a poison pill with a 20% trigger and if the poison pill is triggered, all BAD shareholders except the acquiring company will be able to buy one new share in BAD for each share they own at a 50% discount. Assume that the price of shares remains at $20 per share when the acquirer company is acquiring shares. Despite the BAD Company’s management resisting the buyout attempt, the acquirer company crosses the 20% threshold of ownership.

Answer 14

Expert Solution & Answer

Answer 15

Expert Solution & Answer

Answer 16

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 17

Ch. 28.1 - Prob. 1CC Ch. 28.1 - Prob. 2CC Ch. 28.2 - On average, what happens to the target share price...Ch. 28.2 - Prob. 2CC Ch. 28.3 - What are the reasons most often cited for a...Ch. 28.3 - Prob. 2CC Ch. 28.4 - Prob. 1CC Ch. 28.4 - What do risk arbitrageurs do?Ch. 28.5 - Prob. 1CC Ch. 28.5 - Prob. 2CC

Solution Summary: The author explains that BAD Company's stock price is 20 and the firm has 2 million shares outstanding, and an acquiring company believes that its value can be increased if the management is replaced.

Want to see the full answer?

Chapter 28 Solutions