Compute the diluted value per share

Assignment Help Financial Management

Reference no: EM131498007

Mr. and Mrs. Anderson own three shares of Magic Tricks Corporation's common stock. The market value of the stock is $64. The Andersons also have $48 in cash. They have just received word of a rights offering. One new share of stock can be purchased at $48 for each three shares currently owned (based on three rights). (Do not round intermediate calculations and round your answers to the nearest whole dollar.)

a. What is the value of a right?

b. What is the value of the Andersons’ portfolio before the rights offering? (Portfolio in this question represents stock plus cash.)

c-1. Compute the diluted value (ex-rights) per share.

c-2. If the Andersons participate in the rights offering, what will be the value of their portfolio, based on the diluted value (ex-rights) of the stock?

d. If they sell their two rights but keep their stock at its diluted value and hold on to their cash, what will be the value of their portfolio?

Reference no: EM131498007

Questions Cloud

Uses only debt and common equity : Empire Electric Company (EEC) uses only debt and common equity. What is its cost of common equity?

What is the legal limit on current dividends : Planetary Travel Co. has $157,000,000 in stockholders’ equity. What are the legal limit on current dividends and practical limit based on liquidity?

The libor is primarily used as basis for the rate charged : The LIBOR is primarily used as the basis for the rate charged on:

Think of a business to start : Think of a business to start. Explain the business and how you would get it started using the criteria below. You have $1000 to start the business.

Compute the diluted value per share : Mr. and Mrs. Anderson own three shares of Magic Tricks Corporation's common stock. Compute the diluted value (ex-rights) per share.

Capital budgeting criteria-mutually exclusive projects : Project S costs $10,000 and its expected cash flows would be $5,000 per year for 5 years. If both projects have WACC of 15%, which project would you recommend?

Market place is considering new four-year expansion project : The Market Place is considering a new four-year expansion project that requires initial fixed asset investment of $2.8 million. What is the net present value?

Write a naked ibm put option : At t you write a naked ibm put option for $p at a strike price of $x. It is exercise on you at T. For tax purposes at T you A.

What is currently impacting the statement of cash flows : Are there any major signs you can think of that show what is currently impacting the statement of Cash Flows?

User Account

All Pages