HW3 ans

# 6x10 4 and value is 96 4 x 5 116 a stockholder who

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Unformatted text preview: for 4 shares so that the total ownership is 20 / (10,000,000 + 2,500,000) = 1.6x10 -4 % and value is: (€96 + 4 x €5) = €116. A stockholder who previously owned 16 shares had stocks with 1.6x10 -4 % of ownership and a value of (16 × €6) = €96. This stockholder has now paid €4 for each additional share, so that the total value is: (€96 + 5 x €4) = €116. This stockholder now owns 21 shares with 21 / (10,000,000 + 3,125,000) = 1.6x10 -4 % of ownership and a value of: (21 × €5.52) = €116. Thus, the shareholders are just as well off if the company issues the shares at €4. 16. Before the general cash offer, the value of the firm’s equity is: 10,000,000 × €6 = €60,000,000 New financing raised (from Practice Question 16) is €12,500,000 Total equity after general cash offer = €60,000,000 + €12,500,000 = €72,500,000 Total new shares = €12,500,000/€4 = 3,125,000...
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## This document was uploaded on 02/02/2014.

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