Assume that SmallTech has net income of $1 million and that the earnings will increase in proportion
Question:
Assume that SmallTech has net income of $1 million and that the earnings will increase in proportion with the additional capital raised.
a. Estimate the earning per share that SmallTech will have after the rights issue described in the last problem.
b. Assume that SmallTech could have raised the capital by issuing 333,333 shares at the prevailing market price of $15 per share (thus raising the same amount of equity as was raised in the rights issue) to the public. Estimate the earnings per share that SmallTech would have had with this alternative.
c. As a stockholder, are you concerned about the fact that the rights issue results in lower earnings per share than the general subscription offering (described in b).
Step by Step Answer:
a The current capital is 151 million shares 15million ...View the full answer
Students also viewed these Corporate Finance questions
-
Are you concerned about the national debt? Why or why not? Has your opinion changed as a result of what you have learned in this chapter? Has your opinion changed as a result of the large buildup of...
-
A firm has net income of $200, total assets of $1,200, and total liabilities of $400. The total asset turnover ratio is 3. What is the sustainable growth rate assuming dividends paid total $60? a)...
-
Days Sales in Receivables a company has net income of $195,000, a profit margin of 9.40 percent, and an accounts receivable balance of $106,851. Assuming 75 percent of sales are on credit, what are...
-
1. Is religious training mandatory at all of the schools in question? 2. Does the Court see inevitable church-state entanglements if the Board were allowed to exercise jurisdiction over teachers in...
-
Government Competition, Leviathan and Benevolence: Suppose governments can spend taxpayer resources on both public goods that have social benefits and political rents that are private benefits for...
-
This exercise requires student groups to discuss the advantages and disadvantages of using practical and ideal standards and how their use affects employee motivation.
-
Can managers focus too aggressively on productivity?
-
Barbara Legault operates a full-time law practice in southwestern Ontario. In her spare time, she maintains a small rural acreage for the purpose of growing and selling Christmas trees. In addition,...
-
1. Explain the two types of cases that will go to Federal Court. Stated another way, what are the two instances where Federal Court has jurisdiction over a case? 2 Briefly explain the Exclusionary...
-
Explain why expected net income is also called "accretion of discount."
-
You are stockholder in a SmallTech, a company that is planning to raise new equity. The stock is trading at $15 per share, and there are 1 million shares outstanding. The firm issues 500,000 rights...
-
MVP, a manufacturing firm with no debt outstanding and a market value of $100 million, is considering borrowing $40 million and buying back stock. Assuming that the interest rate on the debt is 9%...
-
Explain why it is better to allocate budgeted support service costs rather than actual support service costs.
-
Frazier's estate includes the following assets: Fair Market Value Date of Death Six Months Later Office building $7,200,000 $6,000,000 Stock in ABC Corporation 35,000 40,000 In order to pay expenses,...
-
what are the Ten Commands of the American Management Association?
-
This problem is about calculating staffing for the Admissions Office (Not the OR). In addition to the 2 Required parts of the Exercise, please also calculate the number of FTE's required if the...
-
the code to be exactly the same from the picture below? How can I write the code to get this output from the picture below. Also, I provide the instruction on what needs to be done. Enter the name of...
-
"To what extent do social institutions such as education, religion, and the media shape individual identity construction and socialization processes, and how do these dynamics contribute to the...
-
On the real number line, label the points with coordinates 0, 1, 1, 2, -2.5, 2, a 3 and 0.25.
-
XYZ Inc. a calendar year, accrual basis corporation, had the following items during 2021: Gross revenue from operations Cost of goods sold $420,000 ($180,000) $9,000 LT capital gain .LT capital...
-
Stock Y has a beta of 1.2 and an expected return of 11.4 percent. Stock Z has a beta of .80 and an expected return of 8.06 percent. If the risk-free rate is 2.5 percent and the market risk premium is...
-
You own a portfolio that has $2,650 invested in Stock A and $4,450 invested in Stock B. If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return...
-
A stock has a beta of 1.14 and an expected return of 10.5 percent. A risk-free asset currendy earns 2.4 percent. a. What is the expected return on a portfolio that is equally invested in the two...
-
answer for both questions: 4. Handwritten Digit Recognition. The goal is to recognize the digit in each image of the dataset given in "Digits Training" which contains some digits from the US Postal...
-
Case Study: The Missing Audit Workpapers By Dennis Greer FACTS: Major "Big 4" Certified Public Accounting firms have three sources of revenue or three divisions: Audit, tax, and Management...
-
Two charges of equal magnitude q separated by a distance d experience a Coulomb force F. Identify two different changes that could be made to the magnitude of the first charge, the magnitude of the...
Study smarter with the SolutionInn App