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. How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing FARO shareholders will experience on the announcement date? Can you specify how you got the percentage for the expected loss, please? According to the book answers, the expected loss should be 30% and then it should be multiplied by $200M. Can you explain why or why not, please?

b. What percentage of the value of FAROs existing equity prior to the announcement is this expected gain or loss?

c. At what price should FARO expect its existing shares to sell immediately after the announcement?