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Category > Business & Finance Posted 03 Jun 2017 My Price 7.00

The Announcement of New Equity and the Value of the Firm

The Announcement of New Equity and the Value of the Firm

1. What are the possible reasons for why the stock price typically drops on the announcement of a seasoned new equity issue?

The Cost of New Issues

2. What are the costs of new issues?

Rights

3. Bountiful Beef Processors (BBP) wants to raise equity through a rights offering. BBP has 2,400,000 shares of common stock outstanding, and must raise $12,000,000. The subscription price of the rights will be $15.

a. How many new shares of stock must BBP issue?

b. How many rights will be necessary to purchase one share of stock?

c. What must a shareholder remit to receive one share of stock?

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Status NEW Posted 03 Jun 2017 11:06 AM My Price 7.00

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