J&J Inc. has decided to issue new stock to raise $9,000,000 to expand its operations. J&J currently has 2.6 million common shares outstanding which sell for $29/share and net income of $4.1 million. J&J's investment dealer will sell the stock for $27 with a spread of 5%. There will be a $75,000 registration cost. A) Calculate current EPS and PE ratio. B) How many shares will have to be sold to net $4.1 million? C) Calculate new EPS and stock price immediately after the sale if the PE ratio remains constant.
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- The Windsor Corporation has 120,000 shares outstanding with a current market price of $8.10 per share. The company needs to raise an additional $36,000 to finance new expenditures, and has decided on a rights issue. The issue will allow current stockholders to purchase one additional share for 20 rights at a subscription price of $6 per share. a) How many new shares must be issued? b) What will be the ex-rights stock price? c) If the ex-rights price were set at $7.90, would you as a potential new stockholder choose to buy shares ex-rights or buy shares at the old price and exercise your rights? d) Suppose that the company was also considering structuring the rights issue to allow for an additional share to be purchased for 10 rights at a subscription price of $3. Prove that a stockholder with 100 shares would be indifferent between purchasing a new share for 10 rights at $3 or purchasing a new share for 20 rights at $6. e) Why do you think the company chose a rights issue rather than a…Company A has earrings per share of $3 with 20 million shares outstanding. The current market price of Company As Stock is $40 per share. Company A is in process of acquiring Company B., which has earnings per share of $1.50, 4 million of common stock shares. Currently, Company Bs stock trades at $25. The acquisition will be done 100% by stock issue by Company A. Exchange ratio will be set in a way that, at current pre-announcement share prices for both firms, the offer represents a 10% premium to buy Company B. What will be the price per share of Company A immediately after the announcement of acquisition? What will be subsequent price action in both Company As and Company Bs stocks? Explain briefly.Walker Machine Tools has 7 million shares of common stock outstanding. The current market price of Walker common stock is $82 per share rights-on. The company's net income this year is $25.00 million. A rights offering has been announced in which 700,000 new shares will be sold at S76.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round Intermedlate calculatlons and round your answers to 2 declmal places.) b. What would the earnings per share be immediately after the rights offering? What would the price- earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round Intermedlate calculatlons and round your answers to 2 decimal places.)
- Walker Machine Tools has 6 million shares of common stock outstanding. The current market price of Walker common stock is S62 per share rights-on. The company's net income this year is $20.00 million. A rights offering has been announced in which 600,000 new shares will be sold at $56.50 per share. The subscription price plus nine rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round Intermedlate calculatlons and round your answers to 2 declmal places.) Earnings per share Price-earnings ratioWalker Machine Tools has 5.6 million shares of common stock outstanding. The current market price of Walker common stock is $54 per share rights-on. The company’s net income this year is $18.00 million. A rights offering has been announced in which 560,000 new shares will be sold at $48.50 per share. The subscription price plus four rights is needed to buy one of the new shares.a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your…The Windsor Corporation has 120,000 shares outstanding with a current market price of $8.10 per share. The company needs to raise an additional $36,000 to finance new expenditures and has decided on a rights issue. The issue will allow current stockholders to purchase one additional share for 20 rights at a subscription price of $6 per share. How many new shares must be issued? What will be the ex-rights stock price? If the ex-rights price were set at $7.90, would you as a potential new stockholder choose to buy shares ex-rights or buy shares at the old price and exercise your rights?
- The estimated pre-IPO value of equity in thecompany is about $63 million and there are 4million shares of existing shares of stock held byfamily members. The investment bank will chargea 7% spread, which is the difference between theprice the new investor pays and the proceeds tothe company. To net $18.3 million, what is thevalue of stock that must be sold? What is the totalpost-IPO value of equity? What percentage of thisequity will the new investors require? How manyshares will the new investors require? What is theestimated offer price per share?HungHom Inc. has 250,000 shares outstanding at $60 per share. For expansion of its overseas plant facilities, the company has decided to raise $5,000,000 by a rights offering with a subscription price of $50. 2-1. How many new shares are offered to raise the required funds? Answer: Number of new shares = ____________ 2-2. How many rights are needed to buy a new share via rights offering? Answer: Number of rights needed = _________rights per share 2-3. What will the price per share be if all rights are exercised? Use two decimal points rounded up (e.g., 79.54). Answer: Price per share = $_____________ 2-4. Assuming everything else is constant, what is the value of the right? Use two decimal points rounded up (e.g., 79.54). Answer: Value of the right=_____________$Walker Machine Tools has 6.5 million shares of common stock outstanding. The current market price of Walker common stock is $72 per share rights-on. The company's net income this year is $22.50 million. A rights offering has been announced in which 650,000 new shares will be sold at $66.50 per share. The subscription price plus seven rights is needed to buy one of the new shares. a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings per share Price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal places.) Earnings…
- National Power has 1020000 shares outstanding. Each share sells for $25. The company wants to raise $5100000 in new equity. Suppose the exercise (subscription) price is set at $15 per share. Calculate the Number of Shares per Right.Walker Machine Tools has 6.3 million shares of common stock outstanding. The current market price of Walker common stock is $68 per share rights-on. The company’s net income this year is $21.50 million. A rights offering has been announced in which 630,000 new shares will be sold at $62.50 per share. The subscription price plus six rights is needed to buy one of the new shares.a. What are the earnings per share and price-earnings ratio before the new shares are sold via the rights offering? (Do not round intermediate calculations and round your answers to 2 decimal places.) earnings per share price-earnings ratio b. What would the earnings per share be immediately after the rights offering? What would the price-earnings ratio be immediately after the rights offering? (Assume there is no change in the market value of the stock, except for the change when the stock begins trading ex-rights.) (Do not round intermediate calculations and round your answers to 2 decimal…American Health Systems has 5,600,000 shares of stock outstanding and will report earnings of $17 million in the current year. The company is considering the issuance of 1,300,000 additional shares, which can only be issued at $21 per share. a. Assume that American Health Systems can earn 4 percent on the proceeds. Calculate earnings per share. (Do not round intermediate calculations and round your answer to 2 decimal places.) Earnings per share b. Should the new issue be undertaken based on earnings per share? O Yes O No 10 B Next >
