Question
FARO Technologies, whose products include portable 3D measurement equipment, recently had 17 million shares outstanding trading at $35 a share. Suppose the company announces its
FARO Technologies, whose products include portable 3D measurement equipment, recently had 17 million shares outstanding trading at $35 a share. Suppose the company announces its intention to raise $200 million by selling new shares.
a) What do market signaling studies suggest will happen to FAROs stock price on the announcement date? Why?
b) How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing FARO shareholders will experience on the announcement date? ---Please include any calculations
c) What percentage of the value of FAROs existing equity prior to the announcement is this expected gain or loss? ---Please include any calculations
d) At what price should FARO expect its existing shares to sell immediately after the announcement? --- Please include any calculations
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