13) A, B, C

LUMPally love feeded to sell to raise the same amount of cash? d. How much better off would the existing share- holders have been? 12. Flotation Costs. The market value of the marketing research firm Fax Facts is $600 million. The firm issues an additional $100 million of stock, but as a result the stock price falls by 2%. What is the cost of the price drop to existing shareholders as a fraction of the funds raised? (LO2) 13. Flotation Costs. Young Corporation stock currently sells for $30 per share. There are 1 million shares currently outstanding. The company announces plans to raise $3 million by offering shares to the public at a price of $30 per share. (LO2) a. If the underwriting spread is 8%, how many shares will the company need to issue in order to be left with net proceeds of $3 million? b. If other administrative costs are $60,000, what is the dollar value of the total direct costs of the issue? Part 4 Financing C. If the share price falls by 3% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect? 4. Private Placements. You need to choose between the following types of issues: (L03) i. A public issue of $10 million face value of 10-year debt. The interest rate on the debt would be 8.5% and the debt would be issued at face value. The underwriting spread would be 1.5% and other expenses would be $80,000. ii. A private placement of $10 million face value of 10-year debt. The interest rate on the private placement would be 9%, but the total issuing expenses would be only $30,000. a. What is the difference in the proceeds to the company net of expenses? Other things being equal, which is the better deal? What other factors beyond the intu isou