The market value of the marketing research firm Fax Facts is $450 million. The f

Question

The market value of the marketing research firm Fax Facts is $450 million. The firm issues an additional $150 million of stock, but as a result the stock price falls by 2%. What is the cost of the price drop to existing shareholders as a fraction of the funds raised? (Enter your answer in millions.)

The market value of the marketing research firm Fax Facts is $450 million. The firm issues an additional $150 million of stock, but as a result the stock price falls by 2%. What is the cost of the price drop to existing shareholders as a fraction of the funds raised? (Enter your answer in millions.)

Explanation / Answer

cost of price drop = Value of existing shareholders * Price fall

                           = 450 *.02

                          = $9 million

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