Describe the role that the “winner’s curse” may play in the underpricing of IPOs….

  1. Describe the role that the “winner’s curse” may play in the underpricing of IPOs.
    (5 marks)

  1. (5 marks)
  1. Does a rights offer cause a share price decrease? Why or why not?
  1. How are existing shareholders affected by a rights offer? Illustrate your answer with an example.

  1. TUV Guy Inc. is proposing a rights offering. There are currently 240,000 shares outstanding at $80 each. There will be 60,000 new shares offered at $60 each.
    (10 marks)
  1. What is the new market value of the company?
  1. How many rights are associated with one of the new shares?
  1. What is the value of a right?
  1. What is the ex-rights price per share?
  1. Why might a company have a rights offering rather than a general cash offer?

WXYZ Co. has concluded that additional equity financing will be needed to expand operations, and that the needed funds will b

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