New issue of shares
Not what you're looking for?
Firm X has 100,000 shares of stock currently outstanding. Each share currently has a true value of $60. Suppose the firm issues 20,000 shares of new stock at the following prices: (a) $65, (b) $55, and (c) $30. The firm takes the funds raised in the issue and invests in securities (i.e., a 0 NPV project). What will be the effect of each of the alternative offering prices on the long-run market price of the shares after the issue assuming that in the long-run the market price for the stock will reflect the stock's true value? (Ignore issues such as taxation and transactions costs)
Purchase this Solution
Solution Summary
The expert calculates the price of shares after a new issue of shares.
Solution Preview
Firm X has 100,000 shares of stock currently outstanding. Each share currently has a true value of $60. Suppose the firm issues 20,000 shares of new stock at the following prices: (a) $65, (b) $55, and (c) $30. The firm takes the funds raised in the issue and invests in securities (i.e., a 0 NPV project). What will be the effect of each of the alternative offering prices on the long-run market price of the shares after the issue assuming that in the long-run the market price for the stock will reflect the stock's ...
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Introduction to Finance
This quiz test introductory finance topics.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.