Gadget Ltd. is considering to go under liquidation procedures after the global effects of corona virus...
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Gadget Ltd. is considering to go under liquidation procedures after the global effects of corona virus on the industry. It just announced today will be paying an annual dividend totally $7 million this year and $18 million one year from now as a liquidating dividend. The company is considering a plan to raise $5 million to fund the business operation within 1 year by issuing new shares. The required rate of return for the shareholders is 15%. Required: Calculate the current value of the firm's equity in total and per share if the firm has three million shares outstanding before issuing new shares for two cases: Case 1: The company does not raise $5 million additional fund by issuing new shares Case 2: The company executes the plan to raise that $5 million additional fund by issuing new shares Holmes Institute Gadget Ltd. is considering to go under liquidation procedures after the global effects of corona virus on the industry. It just announced today will be paying an annual dividend totally $7 million this year and $18 million one year from now as a liquidating dividend. The company is considering a plan to raise $5 million to fund the business operation within 1 year by issuing new shares. The required rate of return for the shareholders is 15%. Required: Calculate the current value of the firm's equity in total and per share if the firm has three million shares outstanding before issuing new shares for two cases: Case 1: The company does not raise $5 million additional fund by issuing new shares Case 2: The company executes the plan to raise that $5 million additional fund by issuing new shares Holmes Institute
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Case 1 In this case where the company does not raise 5 million by issuing new shares the current val... View the full answer
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
Posted Date:
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