Fundamentals of Corporate Finance Standard Edition
10th Edition
ISBN: 9780078034633
Author: Stephen Ross, Randolph Westerfield, Bradford D. Jordan
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 15, Problem 8QP
a)
Summary Introduction
To find: The effect of alternative offering price on the current price of a share
Introduction:
The loss in the
a)
Expert Solution
Answer to Problem 8QP
- If the price of the share is $68, there is no change in the price of the ex-rights stock.
- If the price of the share is $65, there is a drop in price of the ex-rights stock.
- If the price of the share is $60, there is a drop in price of the ex-rights stock.
Explanation of Solution
Given information:
Company C has 175,000 outstanding shares. The worth of each share is $68, the firm’s market value of the equity is $11,900,000. The company issues 30,000 new shares for the following prices: $68, $65, and $60.
Compute the number of rights that are essential:
Hence, the number of rights needed is 5.83 rights per share.
Formula to calculate the price for a share of the stock ex-rights:
N is the number of rights needed,
The price of the share is $68:
Hence, there is no change in the price of the share.
b)
Summary Introduction
To find: The effect of alternative offering price on the current price of a share
Introduction:
The loss in the present shareholders value in the terms of earnings per share, market value, book value, and ownership is termed as dilution.
b)
Expert Solution
Answer to Problem 8QP
- If the price of the share is $68, there is no change in the price of the ex-rights stock.
- If the price of the share is $65, there is a drop in price of the ex-rights stock.
- If the price of the share is $60, there is a drop in price of the ex-rights stock.
Explanation of Solution
Given information:
Company C has 175,000 outstanding shares. The worth of each share is $68, the firm’s market value of the equity is $11,900,000. The company issues 30,000 new shares for the following prices: $68, $65, and $60.
Compute the number of rights that are essential:
Hence, the number of rights needed is 5.83 rights per share.
Formula to calculate the price for a share of the stock ex-rights:
N is the number of rights needed,
The price of the share is $65:
Hence, there is a drop in the price by $0.44 per share.
c)
Summary Introduction
To find: The effect of alternative offering price on the current price of a share
Introduction:
The loss in the present shareholders value in the terms of earnings per share, market value, book value, and ownership is termed as dilution.
c)
Expert Solution
Answer to Problem 8QP
- If the price of the share is $68, there is no change in the price of the ex-rights stock.
- If the price of the share is $65, there is a drop in price of the ex-rights stock.
- If the price of the share is $60, there is a drop in price of the ex-rights stock.
Explanation of Solution
Given information:
Company C has 175,000 outstanding shares. The worth of each share is $68, the firm’s market value of the equity is $11,900,000. The company issues 30,000 new shares for the following prices: $68, $65, and $60.
Compute the number of rights that are essential:
Hence, the number of rights needed is 5.83 rights per share.
Formula to calculate the price for a share of the stock ex-rights:
N is the number of rights needed,
The price of the share is $60:
Hence, there is a drop in the price by $1.17 per share.
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Net sales
Windswept, Incorporated
2024 Income Statement
Cost of goods sold
Depreciation
($ in millions)
Earnings before interest and taxes
Interest paid
Taxable income
Taxes
Net income
$ 14,150
8,150
515
$ 5,485
108
$ 5,377
1,129
$ 4,248
Windswept, Incorporated
2023 and 2024 Balance Sheets
($ in millions)
2023
2024
2023
2024
Cash
Accounts received
$ 300
$ 330
Accounts payable
$ 1,980
$1,955
1,190
1,090
Long-term debt
1,110
1,430
Inventory
2,120
1,795
Common stock
3,440
3,080
Total
$ 3,610
$ 3,215
Retained earnings
690
940
Net fixed assets
3,610
Total assets
$ 7,220
4,190
$ 7,405
Total liabilities & equity
$ 7,220
$ 7,405
What is the fixed asset turnover for 2024?
Chapter 15 Solutions
Fundamentals of Corporate Finance Standard Edition
Ch. 15.1 - Prob. 15.1ACQCh. 15.1 - Prob. 15.1BCQCh. 15.2 - What are the basic procedures in selling a new...Ch. 15.2 - What is a registration statement?Ch. 15.3 - Prob. 15.3ACQCh. 15.3 - Why is an initial public offering necessarily a...Ch. 15.4 - Prob. 15.4ACQCh. 15.4 - Prob. 15.4BCQCh. 15.5 - Prob. 15.5ACQCh. 15.5 - Suppose a stockbroker calls you up out of the blue...
Ch. 15.6 - What are some possible reasons why the price of...Ch. 15.6 - Explain why we might expect a firm with a positive...Ch. 15.7 - What are the different costs associated with...Ch. 15.7 - What lessons do we learn from studying issue...Ch. 15.8 - Prob. 15.8ACQCh. 15.8 - What questions must financial managers answer in a...Ch. 15.8 - Prob. 15.8CCQCh. 15.8 - When does a rights offering affect the value of a...Ch. 15.8 - Prob. 15.8ECQCh. 15.9 - What are the different kinds of dilution?Ch. 15.9 - Is dilution important?Ch. 15.10 - What is the difference between private and public...Ch. 15.10 - Prob. 15.10BCQCh. 15.11 - What is shelf registration?Ch. 15.11 - Prob. 15.11BCQCh. 15 - Prob. 15.1CTFCh. 15 - Smythe Enterprises is issuing securities under...Ch. 15 - Prob. 15.4CTFCh. 15 - Prob. 15.7CTFCh. 15 - Debt versus Equity Offering Size [LO2] In the...Ch. 15 - Debt versus Equity Flotation Costs [LO2] Why are...Ch. 15 - Bond Ratings and Flotation Costs [LO2] Why do...Ch. 15 - Prob. 4CRCTCh. 15 - Prob. 5CRCTCh. 15 - Prob. 6CRCTCh. 15 - Prob. 7CRCTCh. 15 - Prob. 8CRCTCh. 15 - Prob. 9CRCTCh. 15 - Prob. 10CRCTCh. 15 - Prob. 1QPCh. 15 - Prob. 2QPCh. 15 - Prob. 3QPCh. 15 - Prob. 4QPCh. 15 - Prob. 5QPCh. 15 - Prob. 6QPCh. 15 - Prob. 7QPCh. 15 - Prob. 8QPCh. 15 - Prob. 9QPCh. 15 - Prob. 10QPCh. 15 - Prob. 11QPCh. 15 - Prob. 12QPCh. 15 - Value of a Right [LO4] Show that the value of a...Ch. 15 - Prob. 14QPCh. 15 - Prob. 15QPCh. 15 - Prob. 1MCh. 15 - Prob. 2MCh. 15 - Prob. 3MCh. 15 - Prob. 4M
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