The current market value of Ginger Corporation's equity is $120 million. The company has 10 million outstanding shares and will issue 5 million new shares. The investment banker charges a 7% spread.
a. What is the correctly valued offer price?
b. How much cash will the company raise net of the spread?
c What percentage of the company will new stockholders own?
d. What are 3 reasons that explain why a firm wants to raise new equity capital?
e. What are 3 reasons that explain why a firm would want to raise new capital through debt rather than equity?