PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 15, Problem 16PS
a)
Summary Introduction
To determine: Percentage of holding of shares by person J after the issue.
b)
Summary Introduction
To determine: Worth of person J at the end of first day trading
c)
Summary Introduction
To discuss: Number of shares to sell by company to raise the same proceeds if the price is $80.
d)
Summary Introduction
To discuss: Person J’s wealth
e)
Summary Introduction
To discuss: Person J’s cost of under-pricing.
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Fishwick Enterprises has 220,000 shares outstanding, half of which are owned by Jennifer Fishwick and half by her cousin. The two cousins
have decided to sell 110,000 shares in an IPO. Half of these shares would be issued by the company to raise new cash, and half would be
shares that are currently held by Jennifer Fishwick. Suppose that the shares are sold at an issue price of $50 but rise to $80 by the end of the
first day's trading.
Suppose the issue had been priced at $80. How many shares would the company have needed to sell to raise the same gross proceeds from
the IPO?
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer.
a
b 35,800
с
34,375
d
40,200
43,500
Your answer
Fishwick Enterprises has 230,000 shares outstanding, half of which are owned by Jennifer Fishwick and half by her cousin. The two
cousins have decided to sell 120,000 shares in an IPO. Half of these shares would be issued by the company to raise new cash, and
half would be shares that are currently held by Jennifer Fishwick. Suppose that the shares are sold at an issue price of $50 but rise to
$80 by the end of the first day's trading. Suppose also that investors would have been prepared to buy the issue at $80.
a. What percentage of the company will Jennifer own after the issue?
Note: Round your answer to the nearest whole percentage.
b. What will her holding be worth at the end of the first day's trading?
c. Suppose the issue had been priced at $80. How many shares would the company have needed to sell to raise the same gross
proceeds from the IPO?
d. Suppose that the shares are sold at an issue price of $50 but rise to $80 by the end of the first day's trading, what would be…
Fishwick Enterprises has 222,500 shares outstanding, half of which are owned by Jennifer Fishwick and half by her cousin. The two
cousins have decided to sell 115,000 shares in an IPO. Half of these shares would be issued by the company to raise new cash, and
half would be shares that are currently held by Jennifer Fishwick. Suppose that the shares are sold at an issue price of $50 but rise to
$80 by the end of the first day's trading. Suppose also that investors would have been prepared to buy the issue at $80.
a. What percentage of the company will Jennifer own after the issue? (Round your answer to the nearest whole percentage.)
b. What will her holding be worth at the end of the first day's trading?
c. Suppose the issue had been priced at $80. How many shares would the company have needed to sell to raise the same gross
proceeds from the IPO?
d. What in this case would be Jennifer's wealth (cash plus the value of her remaining holding)? (Enter your answer in millions rounded
to 1…
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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