Chapter 17, Comprehensive Problem, Jets Corporation Jet Corporation currently has 120,000 shares outstanding that are selling at $55 per share. It needs to raise $800,000. Net income after taxes is $400,000. Its vice president of finance and its investment banker have decided on a rights offering, but are not sure how much to discount the subscription price from the current market value. Discounts of 12 percent, 22 percent, and 42 percent have been suggested. Common stock is the sole means of financing for the Jets Согрoration. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. (Round to one place after the decimal point where necessary.) b. Determine the value of one right under each of the plans. (Round to two places after the decimal point.) Compute the earnings per share before and immediately after the rights offering under a с. 10 percent discount from the market price.
Chapter 17, Comprehensive Problem, Jets Corporation Jet Corporation currently has 120,000 shares outstanding that are selling at $55 per share. It needs to raise $800,000. Net income after taxes is $400,000. Its vice president of finance and its investment banker have decided on a rights offering, but are not sure how much to discount the subscription price from the current market value. Discounts of 12 percent, 22 percent, and 42 percent have been suggested. Common stock is the sole means of financing for the Jets Согрoration. a. For each discount, determine the subscription price, the number of shares to be issued, and the number of rights required to purchase one share. (Round to one place after the decimal point where necessary.) b. Determine the value of one right under each of the plans. (Round to two places after the decimal point.) Compute the earnings per share before and immediately after the rights offering under a с. 10 percent discount from the market price.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Chapter 17, Comprehensive Problem, Jets Corporation
Jet Corporation currently has 120,000 shares outstanding that are selling at $55 per share. It needs
to raise $800,000. Net income after taxes is $400,000. Its vice president of finance and its
investment banker have decided on a rights offering, but are not sure how much to discount the
subscription price from the current market value. Discounts of 12 percent, 22 percent, and 42
percent have been suggested. Common stock is the sole means of financing for the Jets
Согрoration.
a.
For each discount, determine the subscription price, the number of shares to be issued, and
the number of rights required to purchase one share. (Round to one place after the decimal point
where necessary.)
b.
Determine the value of one right under each of the plans. (Round to two places after the
decimal point.)
Compute the earnings per share before and immediately after the rights offering under a
С.
10 percent discount from the market price.
d.
By what percentage has the number of shares outstanding increased?
e.
Stockholder X has 100 shares before the rights offering and participated by buying 20 new
shares. Compute his total claim to earnings both before and after the rights offering (that is,
multiply shares by the earnings per share figures computed in part c).
f.
Should Stockholder X be satisfied with this claim over a longer period of time?
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