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

question 101

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 $39.00 the day before the offering,what will be the net proceeds for ABC from this offering?

• A) $109.55 million
• B) $110.88 million
• C) $112.32 million
• D) $117.00 million

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Definitions:

Dividend Policies

Dividend policies are guidelines a company follows to decide the size and pattern of cash dividends to its shareholders over time.

Stock Splits

A corporate action to increase the number of outstanding shares, thereby reducing the price per share, without changing the market cap.

Residual Dividend Policy

A strategy where dividends paid to shareholders are set as the remainder after all project and operation expenses and investments are covered.

Residual Dividend Policy

A corporate approach to dividends where the amount distributed is based on profits remaining after all operational and expansion expenses are covered.