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Suarez Enterprises has 2M shares trading at $200 per share when it announces an underwritten SEO for $20M to invest in a project with an
Suarez Enterprises has 2M shares trading at $200 per share when it announces an underwritten SEO for $20M to invest in a project with an NPV of $1M. Assuming that the market priced the shares correctly before the announcement, the firm sells equity priced at that price, and there is no investment banker spread, what should the fair market value of a share be after the firm raises the additional equity? How many new shares have to be issued? Alternatively, assume that the market infers it had overpriced the shares by 4%, the firm sells the shares priced at an additional 2% discount, and the investment bank receives a spread of 3%. What should the fair market value of a share be after the firm raises the additional equity? How many new shares have to be issued
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