Expected impact from the transation or issuane cost


Question: You work for abc in the finance department and own shares that are selling at $20 per share on the NYSE. There is a new stock offering that is going to be publicly announced. the cost from the offering will be 10% of the new offerning. The new offering will increase the number of outstanding share by 30%. There are currently 20,000,000 shares outstanding. Once the annoucement is made public, what might be the expected impact from the transation or issuane cost on each share you own.

a. there will be no costs because ther is no information asymmetry prestnt

b there will be no costs because markets are perfect when it comes to new stock offerings

c. you will lost 3% of the value of the share you own

d. you will lost 2% of the share you own

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Finance Basics: Expected impact from the transation or issuane cost
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