Study guide/Problem set 5 Part A First Analytical Narrative: Z A) On day 1 of the fiscal year (November 1, 2020), Firm Z goes public and issues 500,000 shares of common stock. CEO Nihal (previously the sole owner of the firm) maintains ownership of 300,000 shares, and offers the remaining 200,000 shares to outside investors for 10 + cach (which is beginning-of-fiscal period share-value). Household I purchases the entire initial public offering (IPO) on November 1, 2020, and thus provides a 2,000,000 6 capitalization. Question 1: Explain what type of transaction this is. (In other words, is this a primary market transaction or secondary market transaction? Explain.) Question 2: Does CEO Nihal still maintain operational control of the firm? Explain your answer. (Hint: Recall that control of the firm requires ownership of greater than or equal to 51% of shares outstanding.) B) CEO Nihal uses the 2,000,000 e capitalization provided by Household I to acquire new K, to increase the productive capacity of the firm. C) By the end of the fiscal year (October 31, 2021) Firm Z has generated 10,000,000 in annual profit. Question 3: i) How much of this money (annual profit) belongs to CEO Nihal? Explain. ii) How much of this money belongs to Household J? Explain. D) On the last day of the fiscal year (October 31, 2021) CEO Nihal decides to pay out 8,000,000 of the annual profit as dividends. Question 4: What is the total amount of equity financing that Firm Z has obtained during the fiscal year (November 1, 2020 to October 31, 2021)? Explain your answer. (Hint: Recall that there are two types of equity finance: Dretained earnings (ie. business servings) and ii) selling ownership shares.)