T is ordinary shareholder or not. Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

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Answer 1

Question

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

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A privately held corporation, is making plans for future investments that can increase growth. The company’s manager has recommended that the company “go public” by issuing common stock to raise the funds needed to support the growth. The current owners, who founded the firm, are worried that control of the firm will be diluted by this strategy. If the company undertakes an IPO, it is estimated that each share of stock will sell for $6.25, the investment banking fee will be 22 percent of the total value of the issue. The founders now hold all of the company’s stock: 8 million shares. If the company issues 8 million shares, what proportion of the stock will the founders own after the IPO?

A privately held corporation, is making plans for future investments that can increase growth. The company’s manager has recommended that the company “go public” by issuing common stock to raise the funds needed to support the growth. The current owners, who founded the firm, are worried that control of the firm will be diluted by this strategy. If the company undertakes an IPO, it is estimated that each share of stock will sell for $6.25, the investment banking fee will be 22 percent of the total value of the issue. If the founders must issue stock to finance the growth of the firm, what would you recommend they do to protect their controlling interest for at least a few years after the IPO?

Bluesky.com, which currently is a privately held corporation, is making plans for future growth. The company’s financial manager has recommended that Bluesky“go public” by issuing common stock to raise the funds needed to support thegrowth. The current owners, who are the founders of the company, are concernedthat control of the firm will be diluted by this strategy. If Bluesky undertakes anIPO, it is estimated that each share of stock will sell for $5, the investment bankingfee will be 15 percent of the total value of the issue, and the costs to the companyfor items such as lawyer fees, printing stock certificates, SEC registration, and so onwill be approximately 1 percent of the total value of the issue.a. If the market value of the stock issue is $42 million, how much will Blueskybe able to use for growth?b. How many shares of stock will Bluesky have to issue if it needs to net$42 million for growth?c. The founders now hold all of the company’s stock—10 million shares. If thecompany…

Answer 2

Question

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

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Answer 3

Question

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

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Answer 4

Question

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

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Answer 5

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

Answer 6

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

Answer 7

Chapter 1, Problem 10Q

(a)

Summary Introduction

To explain: T is ordinary shareholder or not.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

Answer 8

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

Answer 9

(b)

Summary Introduction

To explain: The manager should vote its shares or should pass those votes on a pro-rata basis, back to its own shareholders.

Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 1 - What is a firms intrinsic value? Its current stock...Ch. 1 - When is a stock said to be in equilibrium? Why...Ch. 1 - Prob. 3Q Ch. 1 - Prob. 4Q Ch. 1 - Prob. 5Q Ch. 1 - Prob. 6Q Ch. 1 - Should stockholder wealth maximization be thought...Ch. 1 - Prob. 8Q Ch. 1 - The president of Southern Semiconductor...Ch. 1 - Prob. 10Q

T is ordinary shareholder or not. Direct Stockholder’s Intervention: Most of the shares are owned by institutional investors such as insurance companies pension funds, and rather than individual. These institutional investor control over the firm’s operation and oversee the management operation.

Solution Summary: The author explains that the manager should vote its shares or pass those votes on a pro-rata basis, back to its own shareholders.

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Chapter 1 Solutions