Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $56 million. Zang currently has 5 million shares outstanding and will issue 1.7 million new shares. ESM charges a 5% spread. What is the correctly valued offer price? Do not round intermediate calculations. Round your answer to the nearest cent. How much cash will Zang raise net of the spread (use the rounded offer price)? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang's current value of equity is $56 million. Zang currently has 5 million shares outstanding and will issue 1.7 million new shares. ESM charges a 5% spread. What is the correctly valued offer price? Do not round intermediate calculations. Round your answer to the nearest cent. How much cash will Zang raise net of the spread (use the rounded offer price)? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest dollar.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Zang Industries has hired the investment banking firm of Eric, Schwartz, & Mann (ESM) to help it go public. Zang and ESM agree that Zang’s current value of equity is $60 million. Zang currently has 4 million shares outstanding and will issue 1 million new shares. ESM charges a 7% spread. What is the correctly valued offer price, rounded to the nearest penny? How much cash will Zang raise net of the spread (use the rounded offer price)?
Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nabor have decided to make their own estimate of the firm's common stock value. The firm's CFO has gathered data for performing the valuation using the free cash flow valuation model. The firm's weighted average cost of capital is 15%, and it has $1,530,000of debt at market value and $310,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years,2020through2024, are given in the table, Year (t) Free cash flow(FCF) 2020 $230,000 2021 $310,000 2022 $340,000 2023 $370,000 2024 $420,000 Beyond 2024 to infinity, the firm expects its free cash flow to grow by 4% annually. a.Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model. b.Use your finding in part a, along with the…
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