chapter 19 & 20
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| Again, Inc., is proposing a rights offering. Presently, there are 550,000 shares outstanding at $87 each. There will be 85,000 new shares offered at $81 each. | |||||
| a. What is the new market value of the company? | |||||
| b. How many rights are associated with one of the new shares? | |||||
| c. What is the ex-rights price? | |||||
| d. What is the value of a right? | |||||
| e. Why might a company have a rights offering rather than a general cash offer? | |||||
| Shares outstanding | 550.000 | ||||
| Price | $ 87.00 | ||||
| New shares | 85.000 | ||||
| New price | $ 81.00 | ||||
| Output Area: | |||||
| a. | New market value | ||||
| b. | Number of rights needed | ||||
| c. | P(x) | ||||
| d. | Value of a right | ||||
| e. | Right offer help in preventing the diluation for exisitng shareholder and its less costly than cash offer. | ||||
| The St. Anger Corporation needs to raise $45 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. If the offer price is $31 per share and the company’s underwriters charge a spread of 7 percent, how many shares need to be sold? | |||||
| Proceed Required before underwriting Spread = 45000000/(1-7%) | |||||
| Number of shares to be sold = (48387097/31) = | |||||
| Funds needed | $45.000.000 | ||||
| Offer price | $ 31 | ||||
| Spread | 7% | ||||
| Output Area: | |||||
| Proceeds from sale | |||||
| Number of shares offered | |||||
| Raggio, Inc., has 135,000 shares of stock outstanding. Each share is worth $75, so the company’s market value of equity is $10,125,000. Suppose the firm issues 30,000 new shares at the following prices: $75, $70, and $65. What will the effect be of each of these alternative offering prices on the existing price per share? | |||||
| Price $75 | |||||
| Price $70 | |||||
| Price $65 | |||||
| Company equity | $ 10.125.000 | ||||
| Shares outstanding | 135.000 | ||||
| Share price | $ 75 | ||||
| New shares issued | 30.000 | ||||
| New price: | |||||
| Price 1 | $ 75 | ||||
| Price 2 | $ 70 | ||||
| Price 3 | $ 65 | ||||
| Output Area: | |||||
| New offering price: | |||||
| New Overall Price | |||||
| Share price drops by | |||||
| New offering price: | |||||
| New Overall Price | |||||
| Share price drops by | |||||
| New offering price: | |||||
| New Overall Price | |||||
| Share price drops by | |||||
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chapter1920.zip
