ch 20 1, 5, 8

Project Description:

20-1 right offerings
acme is processing a rights offering. presently, there are 550,000 shares outstanding at $87 each. there will be 85,000 new shares offered at $81 each.
a) what is the new market value of the company?
b) how many rights are associated with one of the new shares?
c) what is the ex-rights price?
d) what is the value of a right?
e) why might a company have a rights offerings rather than a general cash offer?

20-5 calculating flotation costs
the acme corporation needs to raise $45 million to finance its expansion into new markets. the company will sell new shares of equity via a general cash offering to raise the needed funds. if the offer price is $31 per share and the company's underwriters charge a spread of 7%, how many shares need to be sold?

20-8 price dilution
rags company has 135,000 shares of stock outstanding. each share is worth $75, so the company's market value of equity is $10,125,000. suppose the firm issues 30,000 new shares at the following price: $75, $70, and $65. what will the effect be of each of these alternative offering prices on the existing price per share?
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Price Type: Negotiable

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