Katie Homes and Garden Co. has 14,300,000 shares outstanding. The stock is curre
ID: 2655341 • Letter: K
Question
Katie Homes and Garden Co. has 14,300,000 shares outstanding. The stock is currently selling at $72 per share. If an unfriendly outside group acquired 25 percent of the shares, existing stockholders will be able to buy new shares at 30 percent below the currently existing stock price.
How many shares must the unfriendly outside group acquire for the poison pill to go into effect? (Do not round intermediate calculations.)
What will be the new purchase price for the existing stockholders? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Katie Homes and Garden Co. has 14,300,000 shares outstanding. The stock is currently selling at $72 per share. If an unfriendly outside group acquired 25 percent of the shares, existing stockholders will be able to buy new shares at 30 percent below the currently existing stock price.
Explanation / Answer
Katie Homes and Garden Co. has 14,300,000 shares outstanding. The stock is currently selling at $72 per share. If an unfriendly outside group acquired 25 percent of the shares, existing stockholders will be able to buy new shares at 30 percent below the currently existing stock price.
a.How many shares must the unfriendly outside group acquire for the poison pill to go into effect? (Do not round intermediate calculations.)
Number of shares = shares outstanding*25%
Number of shares = 14300000*25%
Number of shares = 3,575,000
b.What will be the new purchase price for the existing stockholders? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
New purchase price = currently existing stock price - 30%*currently existing stock price
New purchase price = 72 - 30%*72
New purchase price = $ 50.40
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