EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 1, Problem 15QTD
Summary Introduction
To discuss: The reason why person X think the activity of company U was subsequently well established by the stock market.
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Energy Limited's management, who have been issued with a substantial number of share options, are considering investing in a high risk project which offers potentially significant returns. News of this proposed project has been leaked to the market, the ordinary share price immediately rose but the price of the company's corporate bonds fell sharply. Explain why this may happen.
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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.
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?
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EBK CONTEMPORARY FINANCIAL MANAGEMENT
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