ppose you own 60,000 shares of common stock in a firm with 3 million total shares outstanding. The firm announces a plan to sell an additional 1.2 million shares through a rights offering. The market value of the stock is $35 before the rights offering and the new shares are being offered to existing shareholders at a $5 discount. a. If you exercise your preemptive rights, how many of the new shares can you purchase? b. What is the market value of the stock after the rights offering? (Enter your answer in millions rounded to 1 decimal place. (e.g., 32.1)) c-1. What is your total investment in the firm after the rights offering? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) c-2. If you exercise your preemptive right how many original shares and how many new shares do you have? d-1. If you decide not to exercise your preemptive rights, what is your investment in the firm after the rights offering? (Do not round intermediate calculations. Enter your answer in millions rounded to 3 decimal places. (e.g., 32.161)) d-2. If you sell your rights rather than use them, how much money will you receive from the rights sale and what is the total value of your proceeds from the sale of the rights offering plus your investment in the firm? (Enter your answer in millions rounded to 3 decimal places. (e.g., 32.161)) a New shares

Q: A company plans to raise additional capital by issuing new shares of preferred stock, which has a…

A: Annual dividend (d) = $2.50 Current value (P0) = $40 Flotation cost (F) = 0.06   Cost of new shares…

Q: Wellington Jumbo Crab's stock currently sells for $70 per share with 1 million shares outstanding.…

A: Issue of shares is one of the important source of financing being used by the business. It can be…

Q: A company conducts an initial public offering (IPO). At the end of the road show, the stock is…

A: For this IPO:• The stock is priced at $100 per share during the IPO.• It closes at $110 on the first…

Q: Suppose Blume Corp. is going public and, based on the bookbuilding process, decides it will be…

A: A Dutch auction is a type of auction where the auctioneer starts with a high asking price that is…

Q: Compute the value of a share of Fellows Company stock using the price-earnings multiples method

A: Value of share by Price earnings ratio = P/E ratio * Earnings per share

Q: The current market price of a company's shares is $20. The company is planning to make a 1 for 5…

A: Solution:Right shares are offered to the existing shareholders of the firm in proportion of their…

Q: An investment bank pays $42.80 per share for 5.3 million shares of GM Company in a firm commitment…

A: Price per share = $42.80Number of shares purchased = 5.3 million = 5,300,000Sell to public price =…

Q: general offering to ra of 9 percent. How many shares o not round intermediate cal number, e.g.,…

A: Answer :Require proceeds net of spread=$66,000,000/ (1-0.09) proceeds net of spread=$66,000,000/…

Q: Selling Stock with a Limit Order You would like to sell 100 shares of Pfizer, Inc.(PFE). The current…

A: Bid price is the buying price of currency from you and ask price is the selling price of currency…

Q: DRK, Incorporated, has just sold 140,000 shares in an initial public offering. The underwriter's…

A: Shares sold/issued = N = 140,000Explicit fees = 84,000Offering price = 54 per shareChange in share…

Q: Suppose a company whose shares are trading at $20 per share becomes a target of a tender offer and…

A: The company to be acquired are normally given the more value than proper and fair value given by the…

Q: Jefferson Refining is issuing a rights offering wherein every shareholder will receive one right for…

A: The rights issued by a company in order to invite the existing shareholders to purchase the newly…

Q: You purchase 600 shares of Jenkins Corporation at $30 per share using an initial margin of 70%. The…

A: Equity refers to the ownership of the equity stockholders in the company and means the share of…

Q: Damron, Incorporated, has 230,000 shares of stock outstanding. Each share is worth $84, so the…

A: The theoretical price of the stock following the company's decision to issue additional shares at a…

Q: Rock Industries has hired the investment banking firm to help for going public. Rock and investment…

A: > Given data:>Value pre IPO = $75 million> Shares existing = 5 million> Shares to be…

Q: You own shares in Yahoo that were purchased at a price of $25 per share. Microsoft has offered to…

A: Ratio analysis is quantitive method of getting inside review of an organisation. It helps in…

Q: Suppose you own 5,000 common shares of Laurence Incorporated. The EPS is $9.00, the DPS is $5.00,…

A: a) No. of shares after stock split = Existing shares * 2/1

Q: A firm wants to raise $40 million through a rights offering. The subscription price is set at $40.…

A: Amount need to raise = $40,000,000 Subscription price = $40 Current outstanding shares = 3,000,000

Q: Suppose you own 71,000 shares of common stock in a firm with 2 million total shares outstanding. The…

A: New shares you can purchase = number of shares own x number of right share/total share outstanding

Q: A: purchase 1,000 shares at $15 per share for ABC Company B. purchase 7,500 at-the-money call…

A: Payoff from a call option is calculated as shown below.So, a call option provides payoff only when…

Q: Suppose you own 5,000 common s of Laurence Incorporated. The EPS $8.00, the DPS is $5.00, and the st…

A: companies to split the stock so that after stock split there are large number of shares and prices…

Q: Wellington Jumbo Crab's stock currently sells for $100 per share. Last week the firm issued rights…

A: Given:Stock price = $100 per shareSubscription price = $20 per shareNumber of rights = 3

Q: 1.) You purchase 600 shares of XYZ Corporation at $30 per share using an initial margin of 70%. The…

A: The initial margin is the amount that needs to be deposited in the account of the stock exchange so…

Q: A venture capital company buys  400,000 new shares of a start-up’s stock for $6.40 million. If the…

A: Number of New shares=400,000Start-up stock value=6.4millionNumber of shares outstanding prior to…

Q: 7. An investor owns 500 shares of stock in a firm with a debt/equity ratio = 1.0. The investor…

A: The investors owns share in equity = 500 shares * $2 = $1,000. Debt / equity = 1, it means that the…

Q: Suppose that the Atlantic Sun conference is a for-profit organization that can be bought. Suppose an…

A: Consolidation is an activity in which financial statements of a parent and its subsidiary should be…

Q: The preferred stock of LLC International sells for $38 and pays 5 percent dividends. The net price…

A: Cost of capital for the preferred stock = Dividend / Price

Q: What is the rate of return when 20 shares of Stock A, purchased for $15/share, are sold for $340?…

A: The rate of return is the percentage of profit or loss above the investor's initial investment.

Q: Sunshine Corporation is contemplating issuance of a 10% preferred stock that they expect to sell for…

A: Cost of stock refers to an expense that are being charged over the investment amount for buying the…

Q: Torch Industries can issue perpetual preferred stock at a price of $64.50 a share. The stock would…

A: The cost of preferred stock is calculated using following equation Cost of preferred stock = DP0…

Q: Wellington Jumbo Crab’s stock currently sells for $100 per share. Last week the firm issued rights…

A: Given: Stock price = $100 per share Subscription price = $20 per share Number of rights = 3

Q: A share of stock in Bodah Corporation pays an annual dividend of $5. The current market price is…

A: It is a case of calculating price for the stock for each individual and comparing it with the…

Q: Suppose a Sam's company in CA, completes an $95 million IPO priced to the public at $50 per share.…

A: Solution We are provided with the following information Amount raised from IPO = $ 95 million = $…

Q: The Meadows Corporation needs to raise $65.1 million to finance its expansion into new markets. The…

A: Shares are part of capital use to raise funds from outside person. The persons who holds shares are…

Q: 2. You purchase 600 shares of Jenkins Corporation at $30 per share using an initial marg 70%. The…

A:

Cost of Capital

Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.

Capital Structure

Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.

Weighted Average Cost of Capital

The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.