Pandora Box Company Inc. makes a rights issue at a subscription price of $5 a share. One new share can be purchased for every fiveshares held. Before the issue there were 15 million shares outstanding and the share price was $12.a. What is the total amount of new money raised? (Do not round intermediate calculations. Enter your answer in millions.)b. What is the expected stock price after the rights are issued? (Enter your answer rounded to 4 decimal places.)c. By what percentage would the total value of the company need to fall before shareholders would be unwilling to take up theirrights? (Do not round intermediate calculations. Enter your answer as a positive percent rounded to 2 decimal places.)d. Suppose that you initially own 100 shares plus $100 in the bank. If you take up your rights issue, what will be your total wealth afterthe issue is completed? (Do not round intermediate calculations. Enter your answer rounded to nearest whole dollar.)e. Suppose that the company now decides to issue the new stock at $4 instead of $5 a share. How many new shares would it haveneeded to raise the same sum of money? (Enter your answer in millions rounded to 1 decimal place.)f. What is the expected stock price under this new arrangement after the rights are issued? (Do not round intermediate calculations.Round your answer to 2 decimal places.)g. If you take up your rights issue under this new arrangement, what will be the impact on your total wealth after the issue iscompleted?h. Which arrangement makes you better off: the first, the second, or neither?a.New money raisedmillionb.Stock priceper shareC.Fall in total value%d.Total wealthе.New sharesmillionf.Stock priceper shareg.Impact on your total wealthWhich arrangement makes youbetter offh.

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a. What is the total amount of new money raised? (Do not round intermediate calculations. Enter your answer in millions.) b. What is the expected stock price after the rights are issued? (Enter your answer rounded to 4 decimal places.) c. By what percentage would the total value of the company need to fall before shareholders would be unwilling to take up their

a. What is the total amount of new money raised? (Do not round intermediate calculations. Enter your answer in millions.) b. What is the expected stock price after the rights are issued? (Enter your answer rounded to 4 decimal places.) c. By what percentage would the total value of the company need to fall before shareholders would be unwilling to take up their

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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