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ABC Inc needs to raise $500 million, Current Stock price is $72.50, underwriter requirement 7.5%, underpricing requirement is 6.00%
a. What is the spread?
b. What is the underprice?
c. How many shares must the company need to sell?
d. If the net amount needed is $500 million what are the gross proceeds?
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- Jiffy Wax Corp. can sell common stock for $ 15 per share and its investors require a 14% return. However, the administrative or flotation costs associated with selling the stock amount to $ 2.40 per share. What is the cost of capital for Jiffy Wax if the corporation raises money by selling common stock? Select one: a. 14.00% b. 21.50% C 30.00% d. 16.67%1. Mr. Juan Dela Cruz has a margin account with a balance of P100,000. The initial margin deposit is 50% and ABC Corporation is currently selling at P100 per share. a. How many shares can Mr. Juan Dela Cruz can buy? b. What will be Mr. Juan Dela Cruz profit if the ABC Corporation’s price increase to P120? c. If the maintenance margin is 25%, to what price can ABC Corporation stock price fall before Mr. Juan Dela Cruz receives a margin call?A firm has common stock with D1 = $3.00; P0 = $30; g = 5%; andF = 4%. If the firm must issue new stock, what is its cost of externalequity, re? (15.42%)
- 7. Answer both questions: a) The stock of Payout Inc. will go ex-dividend tomorrow. The dividend will be $1 per share. There are 20,000 shares of stock outstanding. The market value balance sheet for Payout is below: Assets Liabilities and equity Cash $100,000 Equity $1,000,000 Fixed assets $900,000 i) What price is Payout selling for today? Explain your answer. ii) What price will it sell for tomorrow? Explain your answer. b) Now suppose that Payout announces its intention to repurchase $20,000 worth of stock instead of paying out the dividend. i) What effect will the repurchase have on an investor who currently holds 10 shares and sells 2 of those shares back to the company in the repurchase? ii) Compare the effects of the repurchase to the effects of the cash dividend that worked out in 7(a).Answer these two problems with a complete solution.1. You own 25 shares of BDO stock, par value P800.00. If the corporation declares a 5.75% dividend, what is your total dividend that should get?2. If you own a share of stock that costs P1890 and pays an annual dividend of P10.50, what is the rate of income?Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.67 P0 = $27.50; g = 8.00% (constant). Float on new issues is 5% of market price. What is the cost of issuing common stock?
- A company wants to raise $400 million in a new stock issue. Its investment banker indicates that the sale of new stock will require 5 percent underpricing and a 4 percent spread (Hint: the underpricing is 5 percent of the current stock price, and the spread is 4 percent of the issue price) a Assuming the company's stock price does not change from its current price of $65 per share, what would be the issue price to the public after underpricing? How many shares would the company need to sell? Note: Round intermediate calculations to 2 decimal places. Round your answers to 2 decimal places. Enter "Number of shares" answer in millions. 4 Issue price Number of shares million b. How much money will the investment banking syndicate earn on the sale? Note: Round intermediate calculations to 2 decimal places. Enter your answer in millions rounded to 2 decimal places. Investment bankers' revenue million iWhy do you deduct or subtract 1 to flotation cost? Example: Given; Annual dividend (D) = $4.75 Flotation cost (F) = 0.05 or 5% Number of shares issued (N) = 10,000 Stock price (P0) = $50 Formula; Total value able to receive = N * P0 * (1 - F) Total value able to receive = 10,000 * $50 * (1 - 0.05) Total value able to receive = $500,000 * 0.95 Total value able to receive = $475,000Refer to Figure and look at the listing for Hewlett Packard Enterprise.a. How many shares could you buy for $10,000?b. What would be your annual dividend income from those shares? c. What must be Hewlett Packard Enterprise's earnings per share? d. What was the firm's closing price on the day before the listing?
- PLEASE START FROM SECTION B Use the following information about SV Inc. to calculate the company’s Cost of Capital. The stock of SV Inc. sells for $50, and last year’s dividend was $2.10. A flotation cost of 10% would be required to issue new common stock. SVs’ preferred stock pays a dividend of $3.30 per share, and new preferred could be sold at a price to net the company $30 per share. Security analysts are projecting that the common dividend will grow at a rate of 7% a year. The firm can issue additional long-term debt at an interest rate (or a before-tax cost) of 10%, and its marginal tax rate is 35%. The market risk premium is 6%, the risk-free rate is 6.5%, and Supreme Ventures’ beta is 0.83. In its cost-of-capital calculations, SV Inc. uses a target capital structure with 45% debt, 5% preferred stock, and 50% common equity. REQUIRED: Section A Calculate the cost of each capital component: the after-tax cost of debt the cost of preferred stock (including flotation costs)…Messman Manufacturing will issue common stock to the public for $30. Theexpected dividend and growth in dividends are $3.00 per share and 5%, respectively. If the flotation cost is 10% of the issue proceeds, what is the cost of externalequity, re?Assume that an investor buys 100 shares of stock at $37 per share, putting up a 65% margin. a. What is the debit balance in this transaction? b. How much equity funds must the investor provide to make this margin transaction? c. If the stock rises to $59 per share, what is the investor's new margin position? a. The debit balance in this transaction is $ *** (Round to the nearest dollar.)
