FIN3300 Solution Ch15 (W 0818)-1

FIN3300 Solution Ch15 (W 0818)-1 - Solution Chapter 15...

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Solution Chapter 15: Raising Capital Page 505 Questions: 1, 3, 4, 5, 7 1. a. The new market value will be the current shares outstanding times the stock price plus the rights offered times the rights price, so: New market value = 500,000($81) + 60,000($70) = $44,700,000 b . The number of rights associated with the old shares is the number of shares outstanding divided by the rights offered, so: Number of rights needed = 500,000 old shares/60,000 new shares = 8.33 rights per new share c . The new price of the stock will be the new market value of the company divided by the total number of shares outstanding after the rights offer, which will be: P X = $44,700,000/(500,000 + 60,000) = $79.82 d. The value of the right Value of a right = $81.00 – 79.82 = $1.18 e . A rights offering usually costs less, it protects the proportionate interests of existing share-holders and also protects against underpricing. 3.
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This note was uploaded on 05/18/2011 for the course FINANCE Fin3300 taught by Professor Mosley during the Summer '10 term at CSU East Bay.

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FIN3300 Solution Ch15 (W 0818)-1 - Solution Chapter 15...

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