Cye, Inc., has 205,000 shares of stock outstanding. Each share is worth $69, so
ID: 2767376 • Letter: C
Question
Cye, Inc., has 205,000 shares of stock outstanding. Each share is worth $69, so the company’s market value of equity is $14,145,000. Suppose the firm issues 20,000 new shares at the following prices: $69, $66, and $61.
What will be the ex-rights price and the effect of each of these alternative offering prices on the existing price per share? (Leave no cells blank; if there is no effect select "No change" from the dropdown and enter "0". Round your answers to 2 decimal places, e.g., 32.16.)
Cye, Inc., has 205,000 shares of stock outstanding. Each share is worth $69, so the company’s market value of equity is $14,145,000. Suppose the firm issues 20,000 new shares at the following prices: $69, $66, and $61.
Explanation / Answer
Total shares=205,000
New share to be issued for every=205,000/20,000=1025 shares
so
b.
New market price per share=($66*1+10.25*$69)/11.25=$68.73
Decrease per share=$69-$68.73=$0.27
c.
New market price per share=($61*1+10.25*$69)/11.25=$68.29
Decrease per share=$69-$68.29=$0.71
S.no Price at Price Ex-Rights Effect Amount a. $69 $ Nil No change $ Nil per share b. $66 $3 Price drops by $0.27 per share c. $61 $ 8 Price drops by $0.71 per sharRelated Questions
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