PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 15, Problem 10PS
IPOs* Refer to Section 15.1 and the Marvin Prospectus Appendix at the end of this chapter to answer the following questions.
- a. If there is unexpectedly heavy demand for the issue, how many extra shares can the underwriters buy?
- b. How many shares are to be sold in the primary offering? How many will be sold in the secondary offering?
- c. One day post-IPO, Marvin shares traded at $105. What was the degree of underpricing? How does that compare with the average degree of underpricing for IPOs in the United States?
- d. There are three kinds of cost to Marvin’s new issue—underwriting expense, administrative costs, and underpricing. What was the total dollar cost of the Marvin issue?
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Refer to Figure and look at the listing for Hewlett Packard Enterprise.a. How many shares could you buy for $10,000?b. What would be your annual dividend income from those shares? c. What must be Hewlett Packard Enterprise's earnings per share? d. What was the firm's closing price on the day before the listing?
Suppose the price of CANNIBAL WEED (CW) Inc. closes at $69 on October 16, 2018 after the announcement that an extraordinary dividend of $3 per share will be distributed on October 17, 2018 before trading starts.(a) Based on this information, what price would you expect the stock to trade at on October 17 after the dividend has been distributed?(b) Based on your answer to part (a), what is the return for an investor that buys the stock just before the closing on October 16 and sells it again immediately after trading starts on October 17? Explain your answer.(c) Suppose the opening price for the stock on October 17, the day cannabis has been legalized, is $64. Is the stock efficiently price?
Felton
Publishing recently completed its IPO. The stock was offered at
$14.07
per share. On the first day of trading, the stock closed at
$19.97
per share.
a. What was the initial return on
Felton?
b. Who benefited from this underpricing? Who lost, and why?
Chapter 15 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 15 - Vocabulary Each of the following terms is...Ch. 15 - Prob. 2PSCh. 15 - Vocabulary Here is a further vocabulary quiz....Ch. 15 - Stock issues True or false? a. Venture capitalists...Ch. 15 - Prob. 5PSCh. 15 - Prob. 6PSCh. 15 - Prob. 7PSCh. 15 - Venture capital Complete the passage using the...Ch. 15 - Venture capital a. A signal is credible only if it...Ch. 15 - IPOs Refer to Section 15.1 and the Marvin...
Ch. 15 - Prob. 11PSCh. 15 - Prob. 12PSCh. 15 - Issue costs In April 2019. Van Dyck Exponents...Ch. 15 - Underpricing In same U.K. IPOs, any investor may...Ch. 15 - Prob. 15PSCh. 15 - Prob. 16PSCh. 15 - Underpricing Construct a simple example to show...Ch. 15 - Prob. 18PSCh. 15 - Prob. 19PSCh. 15 - Costs of a general cash offer Why are the costs of...Ch. 15 - Prob. 21PSCh. 15 - Prob. 22PSCh. 15 - Rights issues In 2012, the Pandora Box Company...Ch. 15 - Prob. 24PSCh. 15 - Rights issues vs. cash offers Suppose that instead...Ch. 15 - Private placements You need to choose between...Ch. 15 - Prob. 27PSCh. 15 - Prob. 28PSCh. 15 - Dilution Here is recent financial data on Pisa...
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