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

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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...
View Full Document

This document was uploaded on 02/02/2014.

Ask a homework question - tutors are online