Suppose we live in a world in which Modgliani Miller is true, that is no information or tax issues and capital structure is irrelevant. A firm currently has 1,000 shares outstanding, each with a price of $240. The firm announces a 1 for 5 "Rights Issue" of new stock, that is each stock holder would have the right to buy 1 stock for 5 stocks currently held. The price at which the new stock will be sold to existing shareholders will be $180. Assume all shareholders act rationally in making their purchase decision, that is they purchase the Rights stock if the price they will pay will be lower than the price of the stock after the Rights issue is completed. What will the price of the stock be after the Rights issue is completed?

Q: 1) Lisa has a margin account and deposits $2500,000 into it. Assume that the prevailing margin…

A: Initial margin is amount required to deposit in the account with broker and start trading in the…

Q: a. How many new shares will be issued and at what price? The number of new shares issued is The new…

A: A "poison pill" is a defensive strategy adopted by a company's management to deter hostile takeovers…

Q: Erna Corporation is evaluating an extra dividend versus a share repurchase. In either case, $19,000…

A: Earning per share shows how much profit is earned by the investor on per share. It is also called…

Q: The Turnip Company plans to issue preferred stock. Currently, the company’s stock sells for $220.…

A: Those stocks which are prioritized over common stocks at the time of payment of dividends but did…

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: orporation’s board announces to pay $2 million excess cash to shareholders. At the announcement, the…

A: Dividend are share of income with shareholders by company and management and each company have own…

Q: Show the value of the firm, EPS (earnings p. share?) and rate of return on the stock before and…

A: Capitalization rate is the projected rate of return percentage that a property will make on the…

Q: The current stock price of a company is $100 a share. This company announces a dividend of $5 a…

A: When a company goes public, it issues stock to investors in exchange for capital. The investor who…

Q: A corporation purchases 31,000 shares of its own $10 par common stock for $39 per share, recording…

A: STATEMENT OF SHAREHOLDERS EQUITYStatement of Shareholders Equity is also Known as Changes in…

Q: Mill Creek Corporation (MCC) currently has 435,000 shares of stock outstanding that sell for $60 per…

A: Outstanding shares : 435,000 shares  Selling price per share : $60 per share No tax effects exist in…

Q: Emergency Medical's stock trades at $100 a share. The company is contemplating a 3-for-2 stock…

A: Stock trade at 100 Stock split 3/2 The price of Two share of $100 will be spread over the three…

Q: Zebra Corporation currently has 2,500,000 shares of stock outstanding that sell for RM45 per share.…

A: Shares Outstanding = 2,500,000 Share Price = RM45 per share

Q: Your company is finally ready to sell its shares to the public. The manager of your company decided…

A: An investment bank is a company that provides financial services and acts as an intermediary in…

Q: s fallen on hard times and receives a $6M Se r 6M shares at $1 per share. ck pool have claims on 3M…

A: Series A Investment:Investment Amount: $6MNumber of Series A Shares: 1MSeries A Price per Share: $6

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: SoFi Technologies Inc. (SOFI) currently has 13 million shares of common stock outstanding and is…

A: Before split-Total share o/s= 13 millionStock price = $ 215After 5-for-1 Stock Split:New Shares…

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: Coral Inc.'s preferred stock currently sells for $90 a share and pays a dividend of $10 per share;…

A: In this question we need to compute the firm's cost of newly issues preferred stock. Current price…

Q: Toady Inc. has 2 million shares outstanding selling at $70 a share. The Company intends to undertake…

A: A rights issue is a set of rights granted to existing shareholders to buy additional stock shares…

Q: What would be the amount of cash dividend per share if your corporation declares a cash dividend?

A: Cash dividend per share = available amount/ total number of shares stock outstanding  Given amount =…

Q: The Elkmont Corporation needs to raise $52.2 million to finance its expansion into new markets. The…

A: …

Q: Damron, Incorporated, has 225,000 shares of stock outstanding. Each share is worth $83, so the…

A: A company may raise funds from multiple sources. A collection of all these sources constitutes the…

Q: F has 300,000 shares outstanding with a market value of $25 each and no debt. The of F’s equity is…

A: Number of shares outstanding: 300,000 sharesMarket value per share: $25/shareEquity beta (β):…

Q: You are an investor who currently has a debt-equity ratio of 3:1. However you are planning to switch…

A: Part 2: ExplanationStep 1: Determine the current equity portion of your investment.Your current…

Q: You have decided to retire and want to sell your shares in a closely held, all equity firm. The…

A: Share repurchase is referred to as a transaction where a company buys back its own shares from the…

Q: for-2 stock split. What will the market price per share be after the split? (Do not use the…

A: Stock Split: A stock split for a company increases the number of shares, however, the price of…

Q: Consider the case of Tobotics Inc.: Tobotics Inc. currently has 20,000 shares of common stock…

A: The stock split refers to dividing the existing number of shares into more shares. The stock split…

Q: Cross Town Cookies is an all-equity firm with a total market value of $695,000. The firm has 46,000…

A: Market value of equity = $695,000Number of shares outstanding = 46,000Debt issued = $146,000The…

Q: You own 8% or 75,000 shares of Selma, Inc. Your shares have a total market value of $1,200,000. By…

A: In order to calculate percent change in the value of investment first we need to calculate the total…

Q: A privately held company has an estimated value of equity equal to$100 million. The founders own 10…

A: Underwriting costs refer to the charges paid to various underwriters and merchant bankers, which are…

Q: Your company has earnings per share of $4. It has 1 million shares outstanding, each of which has a…

A: The Earning per share  is the earning or return on investment on one share. In the capital…

Q: Emergency Medical's stock trades at $140 a share. The company is contemplating a 3-for-2 stock…

A: Given: Current price = $140 Stock split = 3 for 2

Q: Worst Buy Company has had a lot of complaints from customers of late, and its stock price is now…

A: The share price is the current market price of the share. It is the price of the share at any…

Q: Joanne Harper, a sagacious investor, prefers the stock of a company with a higher ratio of retained…

A: Par value of Common stock= $1 Common stock = $34600 Thus, number of common stock= $34600/$1= 34600…

Q: Jimmy Shoes Inc. has 10,000 shares outstanding with a stock price of $40 per share. The current…

A: For EBIT at indifference point between the capital structures we have to calculate using the formula…

Q: Simon and Simon, makers of cell phones, has a history of paying a dividend of $1 per share to their…

A: Share price is the sum of future cashflows. So, When dividends are paid, the share price falls.…

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 Bert Corp. and Ernie, Inc., have both announced IPOs. You place an order for 700 shares of each…

A: IPO is initial public offering made by the company to common investors in the stock market.

Q: Red Oak, Inc., is planning to raise $2,258,000 in new equity through a private placement. If the…

A: Number of shares to be issued = Amount to be raised / Sales price per share

Q: Maxwell Corp. is coming to the market with a new offering of 300,000 shares, at $25 to the public.…

A: New shares offered: 300,000Issue price: $25Amount received per share: $22Current share:…

Q: A company with 825,000 shares outstanding sells for $120 per share announced a 5-for-6 reverse stock…

A: Current stock price = $120 Shares outstanding = 825000 5 for 6 reverse stock split implies for every…

Q: Xtel Inc. with a total market value of $630 million has $30 million in excess cash and no debt. Xtel…

A: A stock is a financial security that is sold by a corporation to raise funds from the primary…

Q: Iron Corporation is evaluating an extra dividend versus a share repurchase. In either case, $18,000…

A: Answer:- The amount of profit an investor makes per share is shown by earnings per share. It…