Question
A company is raising funds for a new project by issuing new equity in a rights offer. Mr. Smith, one of the company's shareholders, decides
A company is raising funds for a new project by issuing new equity in a rights offer. Mr. Smith, one of the company's shareholders, decides to sell his rights. Which form of loss from dilution would Mr. Smith necessarily experience?
Select one:
a.dilution of book value
b.dilution of market value
c.dilution of percentage ownership
d.dilution of earnings per share
e.none of the above
2.) Direct long-term financing differs from a public debt issue in terms of
Select one:
a.higher registration costs for direct financing.
b.higher distribution costs for direct financing.
c.more restrictive covenants for direct financing.
d.higher negotiation costs during default for direct financing.
e.higher interest rates in public debt issues.
3.) Zanders Inc. is issuing new shares in a rights offer to raise $10 million for a new project. The subscription price for each new share is $10. The company has outstanding common shares of two million and share price of $25. If the company's investment dealer charges a 5% spread on the rights offer, what is the percentage flotation cost on the net proceeds? (Round your answer to two decimal places.)
Select one:
a.5.26%
b.6.00%
c.6.38%
d.7.32%
e.7.68%
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