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...
-
Using the Monte Carlo setup for the one-way error component model, given in Maddala and Mount (1973), compare the various estimators of the variance components and regression coefficients studied in...
-
In the hybrid fee-subsidy scheme described in Figure 15.7, suppose there are two additional marginal savings functions, one even higher than \(\mathrm{MS}_{\mathrm{H}}\) and one lower than \(M...
-
Presented below is a list of costs and expenses usually incurred by Burrand Corporation, a manufacturer of furniture, in its factory. 1. Salaries for assembly line inspectors. 2. Insurance on factory...
-
1.A woman eats 65g of protein per day. She weighs 156 lbs. How much protein is she getting per kg of body weight? Explain briefly both question 2.152 lbs = ________________kg. [2.2 lbs = 1 kg] explain
-
1. I say "bravo" and "right on!" Now we have some real-life humane heroes to look up to! These brave people [a group of animal liberators] went up against the insensitive bureaucratic technology, and...
-
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%...
-
In Problems 6184, solve each equation on the interval 0 < 2. csc0cot 0 + 1
-
The highest priority for payment of unsecured claims in a bankruptcy proceeding is a. Administrative expenses of the bankruptcy. b. Unpaid federal income taxes. c. Wages of each employee up to...
-
Forces with magnitudes of 180 newtons and 275 newtons act on a hook (see figure). The angle between the two forces is degrees.(a) When = 30, find the direction and magnitude of the resultant...
-
In a large group of corporate executives, 20 % have no college education, 10 % have exactly 2 years of college, 20 % have exactly 4 years, and 50 % have 6 years. A sample size of 2 (with replacement)...
-
Assume that Beck Consulting chooses to take advantage of current business opportunities and will need to grow to 100 members in the next 9 months in order to respond to the challenges. What changes...
-
Microsoft made its name by building two monopolies, its Windows operating system and its Office suite of personal productivity software, that are used the world over. Windows, for example, runs on...
-
Apply the method of undetermined coefficients to find a particular solution of each of the systems in Problems 1 through 14. If initial conditions are given, find the particular solution that...
-
Experiment: Tossing four coins Event: Getting three heads Identify the sample space of the probability experiment and determine the number of outcomes in the event. Draw a tree diagram when...
-
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...
-
Martinez Company buys merchandise on account from Marigold Company for $592. Martinez sells the goods to Ellis for $900 cash. Use a tabular summary to record the transactions for Martinez Company...
-
The section has tension and compression steel reinforcement. When the neutral axis depth is at infinity, c = , the section is in uniform compression, all points on the section have 0.003 compressive...
-
The Big Choo Choo Company (BCCC) owns a rail line from the town of Isolated to the coastal port of Notso. It cost them $20 million to build the rail line in 2016. It is now 2023. The Small Gold...
Study smarter with the SolutionInn App