Problem #1 (6 marks) The Creasthaven Horses Corporation needs $75 million to finance its expansion into new markets. The company will sell new shares of equity via a firm commitment offering to raise the needed funds. a. If the offer price is $19 per share and the company's underwriters charge a 7% spread, how many shares need to be sold? (3pts) b. If in addition to the information is part a, the Ontario Securities commission filing fee and associated administrative expenses of the offering are $900,000, how many shares need to be sold? (3pts) = Price Problem #2 (8 marks) Luther Industries is in the process of raising new funds via a Dutch auction. They would like to sell 400 shares to the public. Luther industries has received the following five bids: Bidder Quantity Price SA 100 $13.00 BT 200 $15.00 C 100 $16.00 $14.00 EL $12.00 Tun NPNE 1 91lol a) What would be the offering price of the new shares if the company is to achieve its goal of selling 400 shares? (2pt) b) How much money will Luther Industries be able to raise through the Dutch auction? (1pt) c) How many shares will bidders A, B, C, D, and E receive? (5pts) Problem #3 (15 marks) GreenThumb Greenhouses Inc., currently an un-levered firm, is planning a major expansion program. GreenThumb has proposed the following options to raise funds for the expansion. Plan A is an all equity plan. Under this plan, 2,000,000 common shares will be sold to net the company $2.50 per share. Plan B calls for a debt issue of 20-year maturity bonds as well as some additional new equity at the same price per share as in plan A. The debt issue will be for $2,000,000 and carry a 9 percent interest rate. Green Thumb's tax rate is 40% and the company currently has 5,000,000 shares of common stock outstanding. a) How much capital must be raised for this project? (1 mark) Calculate the indifference EBIT (EBIT*) associated with these two plans. (6 marks) Calculate the EPS at the indifference EBIT calculated in part b. (2 marks) If the expected EBIT is $800,000, which plan should be chosen? Explain why? (2 marks). baa