Green Dome Industries has 8 million shares outstanding and is about to issue 10 million new shares in an iPO. The IPO price has been set at $15 per share, and the underwriting spread is 6%. The IPO is a big success with investors, and the share price rises to $35 the first day of trading. (a) What is amount of capital raised during the IPO? (b) What is the amount that Green Dome paus as the underwriter's spread? !
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- An all-equity business has 150 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization (a recap). It will raise $1 billion in debt and repurchase 50 million shares. a. What is the market value of the firm prior to the recap? What is the market value of equity? (Enter your answers in billions rounded to 1 decimal place.) Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity? (Enter your answers in billions rounded to 1 decimal place.) Assume now that the recap increases total firm cash flows, which adds $200 million to the value of the firm. Now what is the market value of the firm? What is the market value of equity? (Enter your answers in billions rounded to 2 decimal places.)An all-equity business has 120 million shares outstanding selling for $20 a share. Management believes that interest rates are unreasonably low and decides to execute a leveraged recapitalization (a recap ). It will raise $1 billion in debt and repurchase 50 million shares.a. What is the market value of the firm prior to the recap? What is the market value of equity? Note: Enter your answers in billions rounded to 2 decimal places.b. Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity?Note: Enter your answers in billions rounded to 2 decimal places.d. Assume now that the recap increases total firm cash flows, which adds $140 million to the value of the firm. Now what is the market value of the firm? What is the market value of equity?Note: Enter your answers in billions rounded to 2 decimal places.You have started a company and are in luck-a venture capitalist has offered to invest. You own 100% of the company with 5.39 million shares. The VC offers $1.06 million for 850,000 new shares. a. What is the implied price per share? b. What is the post-money valuation? c. What fraction of the firm will you own after the investment? a. What is the implied price per share? The implied price per share will be $ per share. (Round to the nearest cent.) b. What is the post-money valuation? The post-money valuation will be $ c. What fraction of the firm will you Your fractional ownership will be million. (Round to two decimal places.) own after the investment? %. (Round to one decimal place.)
- Bonanza Billiard Games is an all-equity firm with 50 million shares outstanding, which are currently trading at $22 per share. Last month, Bonanza announced that it will change its capital structure by issuing $300 million in debt. The $200 million raised by this issue, plus another $200 million in cash that Bonanza already has, will be used to repurchase existing shares of stock. Assume that capital markets are perfect.• What is the market capitalization of the company before the transaction takes place?• What is the market capitalization of the company after the transaction takes place?Your Company has 100 million of common stock shares outstanding and is planning a 10 million shares SEO. At the time of the announcement, the stock was $20 per share. Of these 10 million shares sold: 8 million shares are shares being sold by your company and the remaining shares are sold by original investors in your company (venture capitalists). Underwriter’s charge is expected to be 3% of the gross proceeds. How much money will your company raise? In real market conditions: a) will your company raise more or less to your answer above? b) likely time to implement/execute this SEO? Explain briefly.You have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company with 4.96 million shares. The VC offers $1.12 million for 820,000 new shares. a. What is the implied price per share? b. What is the post-money valuation? c. What fraction of the firm will you own after the investment?
- Apple corporation is looking to invest in Dark Sky computing company. Dark Sky is specialized in weather forecasting software applications. Apple corporation is looking to invest in 500,000 shares of Dark Sky company in the end of the year. The current stock price of Dark Sky on the NASDAQ stock exchange is $24.84 per share, and the dividend yield for the coming year is expected to be 5.4%. a)What is the expected value of the first dividend payment at the end of the year? b) How would you use the dividend yield model to value the price of a stock if it presently does not pay dividends but is expected to pay dividends in the future?Your PE firm is considering acquiring a publicly traded digital advertising company, Star Dust Enterprises (SDE). The following are some key statistics of the stock of SDE today (t = 0). SDE is 100% equity financed. Its cost of capital (apply this to all cash flows) is 11.2% and the payout ratio is 79%. Expected earnings per share of SDE at next year (t = 1) are $6.6. Assume that without new investments, expected earnings of SDE would remain at their time-1 level in perpetuity. All future investments are expected to generate $0.2 in incremental earnings for each $1 of investment. For an investment made at time t, incremental cash flows are generated starting in year t + 1. (a) Compute expected dividend per share of SDE next year (t = 1): $ (b) Compute expected dividend per share of SDE two years from now (t = 2): $ (c) What is the present value of growth opportunities (PVGO) of SDE today? $Suppose that the newspaper publishing company described above expected net earnings is $85 million and the firm is going public and will issue 15 million shares of stock. What is the price of the IPO using the P/E ratio if the forward P/E of comparable newspapers is 15x?
- Please use Excel to solve: You have just purchased a share of stock for $20. The company is expected to pay a dividend of $0.50 per share in exactly one year. If you want to earn a 10% return on your investment, what price do you need if you expect to sell the share immediately after it pays the dividend?- The firm you founded currently has 14 million shares, of which you own 8 million. You are considering an IPO where you would sell 2 million shares for $29 each. If all of the shares sold are from your holdings, how much will the firm raise? What will your percentage ownership of the firm be after the IPO? If all of the shares sold are from your holdings, (Select the best choice below.) A. the firm will raise $25 million from the IPO. B. the firm will raise $350 million from the IPO. c. the firm will raise no money from the IPO. O D. the firm will raise $200 million from the IPO. Your percentage ownership of the firm after the IPO will be%. (Round to one decimal place.)Your investment bankers price your IPO at $15.23 per share for 10.6 million shares. If the price at the end of the first day of trading is $16.95 per share, a. what was the percentage underpricing? b. how much money did the firm miss out on due to underpricing?