PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 15, Problem 23PS
Rights issues In 2012, the Pandora Box Company made a rights issue at €5 a share of one new share for every four shares held. Before the issue there were 10 million shares outstanding and the share price was €6.
- a. What was the total amount of new money raised?
- b. The rights issue gave the shareholder the opportunity to buy one new share for less than the market price. What was the value of this opportunity?
- c. What was the prospective stock price after the issue?
- d. How far could the total value of the company fall before shareholders would be unwilling to take up their rights?
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Students have asked these similar questions
In 2001 the Pandora Box Company made a rights issue at $5 a share to its current shareholders
offering one new share for every four shares already held. Before the issue there were 10 million
shares outstanding and the share price was $6.
(1a) What was the total amount of new money raised?
(1b) What was the prospective stock price after the issue?
(1c) What was the value of the right to buy one new share?
(1d) How far could the total value of the company fall before share-holders would be unwilling to
take up their rights?
(1e) Explain the difference between a uniform-price auction and a discriminatory auction. Why
might you prefer to sell securities by one method rather than another?
a) Ace Company stockholder's equity at the end of 2015 is shown in the table below.
Determine the number of preferred shares issued; and b) Determine the issue price of each
ordinary share, if we assume that the ordinary shares are issued all at one time. Show and explain
the solution step by step.
Preference share capital, €10 par value
€500,000
Share premium – Preference
€280,000
Ordinary share capital, €25 stated value
Share premium - Ordinary
€1,500,000
€900,000
Treasury Shares (10,000 ordinary shares)
Retained earnings
€150,000
€1,235,000
Opener-in-Review
Tesla Motors shares were initially offered to investors at $17. Three years later,
the price was $90 per share. What was the compound annual return that Tesla
investors owned over this period? Given that Tesla paid no dividends and was
not expected to start paying dividends anytime soon, what method might ana-
lysts have used to value the company's shares in 2013? The company sold 13.3
million shares in its IPO with a par value of $0.001 per share. How much paid-
in capital did Tesla record on its balance sheet as a result of the IPO? Do you
think that the highly favorable Consumer Reports review of the Model S
boosted Tesla's stock primarily because the review reduced the company's risk
or because it boosted expected cash flows?
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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