Market values the shares of a company


Problem:

"If the market values the shares of a company at 50 dollars, then the shares are worth 50. If the company receives $40 from the underwriter, then they are not are not receiving full value for their equity. So consistent with efficient market theory, the cost to them is $10".

Question

If the firm floats an issue at $40 per share and it sells for $50 per share isn't the difference a net benefit to the firm?

Solution Preview :

Prepared by a verified Expert
Finance Basics: Market values the shares of a company
Reference No:- TGS02042839

Now Priced at $20 (50% Discount)

Recommended (97%)

Rated (4.9/5)