All else constant, a reverse stock split:

Select one:

a. Decreases the earnings per share.

b. Increases the total market value of the firm.

c. Increases the number of shares outstanding.

d. Increases the market price per share.

e. Increases the book value of the firm.

Question 3

An Edmonton firm has 800,000 shares outstanding at a market price of $120 a share. It wants to raise $16 million via a rights offering. The subscription price is $100 per share. What will the firm be worth after the offering?

Select one:

a. $112.0 million

b. $115.8 million

c. $98.4 million

d. $96.0 million

e. $105.0 million

Question 4

Both firms are 100% equity-financed. Firm A can acquire firm B for $82,500 in the form of either cash or stock. The synergy value of the deal is $12,500.

	Firm A	Firm B
Number of Shares	10,000	7,500
Price per Share	$25.00	$10.00

What will the price per share be of the post-merger firm if payment is made in stock?

Select one:

a. $27.30

b. $25.38

c. $25.76

d. $25.50

e. $25.00