Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2. The risk free rate is 5%. Aquarius Corporation, Arizona-based manufac- urer of healing power crystals, has existing assets generating certain cash jlows of $255.26
2. The risk free rate is 5%. Aquarius Corporation, Arizona-based manufac- urer of healing power crystals, has existing assets generating certain cash jlows of $255.26 million two years from now. A new exciting investment opportunity has surfaced, the rights to the book "Find Your Seventh Chakra." The project would cost Aquarius $80 million today and generates a single certain cash flow of $126 million next year. Aquarius has no cash on hand and will finance the in- vestment by issuing new shares. Aquarius CURRENTLY has 1.5 million shares outstanding a) (5 points) How big of an equity stake must be given to the NEW share- holders in order to raise the required $80 million? (Note: Find a MINIMUM percentage required so that new shareholders just get fair return on capital) b) (5 points) What is the value of the equity stake held by the CURRENT shareholders after the deal? How much do current shareholders benefit from the deal? c) (5 points) How many new shares must be issued, and at what price will they be sold
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started