The manner in which a decision of a privately held company to go public affect company.

Question

Pat’s Video Games has been struggling recently as it has been rumored that the owners are secret Dodgers fans. As a result, its stock price is now only $4 per share. It is going to declare a one-for-two reverse stock split to increase the stock value. a. If an investor owns 90 shares, how many shares will he own after the reverse stock split? b. What is the anticipated price of the stock after the reverse stock split? c. Because it became public knowledge that the owners of Pat’s Video Games were Dodgers fans (and used company proceeds to purchase Dodger paraphernalia, the stock price continued to drop even after the stock split. If the stock price only goes up to 75 percent of the value computed in part b. What will the stock’s price be? d. How has the total value of an investor’s holdings changed from before the reverse stock split to after the reverse stock split (based on the stock value computed in part c)? e. What important lesson did the investor learn?

Answer 1

Question

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

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Pat’s Video Games has been struggling recently as it has been rumored that the owners are secret Dodgers fans. As a result, its stock price is now only $4 per share. It is going to declare a one-for-two reverse stock split to increase the stock value. a. If an investor owns 90 shares, how many shares will he own after the reverse stock split? b. What is the anticipated price of the stock after the reverse stock split? c. Because it became public knowledge that the owners of Pat’s Video Games were Dodgers fans (and used company proceeds to purchase Dodger paraphernalia, the stock price continued to drop even after the stock split. If the stock price only goes up to 75 percent of the value computed in part b. What will the stock’s price be? d. How has the total value of an investor’s holdings changed from before the reverse stock split to after the reverse stock split (based on the stock value computed in part c)? e. What important lesson did the investor learn?

Purrogi Cat Treats Inc. earned $500 million last year and retained $290 million in earnings. What is the payout ratio?

Ethical dilemma: Republic Communications Corporation (RCC) has offered you an attractive position in its financial planning division. The new position would constitute a promotion with a $30,000 increase in salary compared to the job you now have at National Telecommunications, Inc. (NTI). The problem is that RCC wants you to bring the rate-setting software you developed at NTI, along with some rate data, with you to the new job. Even though NTI sells its software to other companies and information concerning telephone rates is available to the public, you know that such knowledge will help RCC significantly in its attempt to redesign its rate-setting system. In fact, according to the situation presented in the text, a new and improved rate-setting program could be worth as much as $200 million per year for RCC. Therefore, the question is whether the information RCC wants you to take with you to your new job is proprietary to NTI. Should the rate-setting program and the rate data be…

Answer 2

Question

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

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Answer 3

Question

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

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Answer 4

Question

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

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Answer 5

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

Answer 6

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

Answer 7

Chapter 18, Problem 4Q

a)

Summary Introduction

To determine: The manner in which a decision of a privately held company to go public affect company.

Answer 8

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

Answer 9

b)

Summary Introduction

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

Answer 10

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

Answer 11

c)

Summary Introduction

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

Answer 12

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

Answer 13

d)

Summary Introduction

To determine: The manner in which Elimination of the pre-emptive right affect company.

Answer 14

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

Answer 15

e)

Summary Introduction

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

Answer 16

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Answer 17

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Ch. 18 - Prob. 1Q Ch. 18 - Prob. 2Q Ch. 18 - Prob. 3Q Ch. 18 - Prob. 4Q Ch. 18 - Prob. 5Q Ch. 18 - Prob. 2P Ch. 18 - Benjamin Garcia’s start-up business is succeeding,...Ch. 18 - Prob. 1MC Ch. 18 - Prob. 2MC Ch. 18 - Prob. 3MC

The manner in which a decision of a privately held company to go public affect company.

Solution Summary: The author analyzes the manner in which a privately held company's decision to go public affects its ability to attract capital and reduce the cost of flotation.

To determine: The manner in which a decision of a privately held company to go public affect company.

To determine: The manner in which the increasing institutionalization of the “buy side” of the stock and bond markets affect company.

To determine: The manner in which the trend toward financial conglomerates as opposed to stand-alone investment banking houses affect company.

To determine: The manner in which Elimination of the pre-emptive right affect company.

To determine: The manner in which the introduction in 1981 of shelf registration of securities affect company.

Chapter 18 Solutions