ABC Logistics The Managers of ABC Logistics (ABC) Have Decided to Expand

question 20

Multiple Choice

ABC Logistics
The managers of ABC Logistics (ABC) have decided to expand the company’s operations into a few new markets. To fund this opportunity, ABC has decided to launch a seasoned equity offering to raise new equity capital. ABC currently has 12 million shares outstanding, and yesterday’s closing market price was $40.00 per ABC share. The company plans to sell 3 million newly issued shares in its seasoned offering. The investment banking firm of Armstrong Incorporated has agreed to underwrite the new stock issue for a 4 percent discount from the offering price, which ABC and Armstrong have agreed should be $0.50 per share lower than ABC’s closing price the day before the offering is sold.

-If ABC's stock price closes at $46.75 the day before the offering,calculate the total cost of the seasoned equity offering to ABC's existing stockholders as a percentage of the offering proceeds.

• A) 32.72%
• B) 31.65%
• C) 30.17%
• D) 29.89%

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Definitions:

Greed

An intense and selfish desire for something, especially wealth, power, or food, often at the expense of others' needs or feelings.

Corporate Governance

The system of rules, practices, and processes by which a company is directed and controlled.

Boards of Directors

A group of individuals elected by shareholders to oversee and guide the management and strategic direction of a corporation.

Individualism View

A perspective that emphasizes the moral worth of the individual, prioritizing personal independence and self-expression.