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mote1985 [20]
3 years ago
9

Nemesis, Inc., has 215,000 shares of stock outstanding. Each share is worth $81, so the company's market value of equity is $17,

415,000. Suppose the firm issues 48,000 new shares at the following prices: $81, $75, and $69. 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 "O". Round your answers to 2 decimal places, e.g., 32.16.)
Price Ex-Rights Amount $ Effect per share
per share
per share
No change
Price drops by
Price drops by
Business
1 answer:
Ksivusya [100]3 years ago
4 0

Answer:

$81, $75, and $69

a. Market value of existing shares = 215000 * $81 = $17415000

   Value of New shares issued = 48000 * $81 =        <u>$3888000</u>

                                                                                     <u>$21,303,000</u>

Price after issue of new shares = 21,303,000 / (215000 + 48000)

= 21,303,000 / 263,000

= $81

Conclusion: No changes ($0 per share

b. Market value of existing shares = 215000 * $81 = $17415000

   Value of New shares issued = 48000 * $75 =        <u>$3600000</u>

                                                                                     <u>$21015000</u>

Price after issue of new shares = 21015000 / (215000 + 48000)

= 21,015,000  / 263,000

= $79.90

Conclusion: There is a decrease in amount (81 - 79.90) = $1.10 per share

c. Market value of existing shares = 215000 * $81 = $17415000

   Value of New shares issued = 48000 * $69 =        <u>$3312000</u>

                                                                                     <u>$20,727,000</u>

Price after issue of new shares = 20,727,000 / (215000 + 48000)

= 20,727,000 / 263,000

= $78.81

Conclusion: There is a decrease in amount (81 - 78.81) = $2.19 Per share

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