User Account

All Pages

Calculate the total number of ipc common shares

Assignment Help Financial Management
Reference no: EM131315594

Six years ago, High-Tech Fund III made a $3 million investment in Internet Printing Company (IPC) and received 2 million shares of series A convertible preferred stock. Each of these shares is convertible into two shares of IPC common stock. Three years later, High-Tech III participated in a second round of financing for IPC and received 3 million shares of series B convertible preferred stock in exchange for a $15 million investment. Each series B share is convertible into one share of IPC common stock.

Internet Printing Company is now planning an IPO, but prior to this announcement, the company will convert all its outstanding convertible preferred shares into common stock. After conversion, IPC will have 20 million common shares outstanding and will create another 2 million common shares for sale in the IPO.

The underwriter handling IPC's initial offering expects to sell these new shares for $45 each but has prohibited existing shareholders from selling any of their stock in the IPO. The underwriter will keep 7 percent of the offer as an underwriting discount. Assume that the IPO is successful and that IPC shares sell for $60 each, immediately after the offering.

a. Calculate the total number of IPC common shares that High-Tech III will own after the IPO. What fraction of IPC's total outstanding common stock does this represent?

b. Using the post-issue market price for IPC shares, calculate the (unrealized) compound annual return that High-Tech III earned on its original, and subsequent investments, in IPC stock.

c. Now assume that the second-round IPC financing had been made under much less favorable conditions and that High-Tech III paid only $1 million, instead of $15 million, for the 3 million series B shares. Assuming that all the other features of IPC's initial offering, described above, hold true, calculate the (unrealized) compound annual return that High-Tech III earned on this second investment in IPC stock.

Reference no: EM131315594

Questions Cloud

What steps should katherine take from here : Who has an exemplary record, taking drugs from the supply cabinet. Questions: How does Katherine react to this situation? What steps should Katherine take from here?
Critically think and solve engineering design problems : Critically think and solve engineering design problems - Investigate and analyse client and user requirements, technical briefs and apply ?significant knowledge to design scenarios
Explain principal mode of application of aqueous foam agent : esearch an incident involving a gasoline fire and briefly describe the incident. Discuss the best aqueous foam(s) for fighting the fire. Explain the principal mode of application of the aqueous foam agent.
Calculate the compound annual return : Assuming the IPO is successful, calculate the compound annual return that Techno will have earned on its investment.
Calculate the total number of ipc common shares : Calculate the total number of IPC common shares that High-Tech III will own after the IPO. What fraction of IPC's total outstanding common stock does this represent?
Relationship to the context of proper hr management : Identify and describe/explain any legal or ethical issue(s) and their relationship to the context of proper HR management. Discuss how the event/case/issue is relevant to the course. i.e. it addresses and expands on material discussed in a specific..
Write terms that are equal to zero in constitutive equations : Write those terms that are equal to zero in the constitutive equations (A, B, and D) for the following special laminates
What rate of return it earn on two most successful deals : If the VC fund's expected return equals 50 percent, what rate of return must it earn on the two most successful deals to achieve a portfolio return equal to expectations?
What are total liabilities from your balance sheet : What is the net income to 2 decimal places for January - What was the total debit to the purchases account for January and What are the total Liabilities and Equity from your balance sheet?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the bonds current yield

Three (3) years ago the Zappa Corporation issued a 20-year, 7% annual coupon bond at a price of $1,200. If interest rates have remained unchanged what is the bond's current yield today?

  What current yield would be reported in the wall street

Hope Corporation bonds bearing a coupon rate of 12%, pay coupons semi-annually, have 3 years remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity? George, Inc. bonds have a face value of $1,000 and a 9% coup..

  Future value of this cash flow stream

If you receive $2,590 at the end of each year for the first three years and $627 at the end of each year for the next two years. What is the future value of this cash flow stream? Assume interest rate is 6%.

  Would the proposed acquisition likely be more feasible

Would the proposed acquisition likely be more feasible if the dollar is expected to appreciate or depreciate over the long run? Explain.

  Expected to pay the dividends

Lohn Corporation is expected to pay the following dividends over the next four years: $17, $13, $11, and $6.50. Afterward, the company pledges to maintain a constant 4 percent growth rate in dividends forever. If the required return on the stock is 1..

  Lieu of those future cash flows

Due to an accident, you will be compensated with $1000 every year for three years and $2000 every year thereafter for another three years. How much would you be willing to take today in lieu of those future cash flows, assuming that you could earn an..

  Assume the projects cost of capital

Find the NPV and PI of a project that costs $1,500 and returns $800 in year one and $850 in year two. Assume the project’s cost of capital is 8%.

  Describe how bach could use a straddle to hedge

Describe how Bach could use a straddle to hedge its possible positions in dirham. Consider three scenarios. In the first scenario, the dirham's spot rate at option expiration is equal to the exercise price of 0.98 euro.

  What is the yield to maturity for these bonds

Blue Crab, Inc. plans to issue new bonds, but is uncertain how the market would set the yield to maturity. The bonds would be 10-year to maturity, carry a 15.88 percent annual coupon, and have a $1,000 par value. Blue Crab, Inc. has determined that t..

  What will be the change in price per share

What will be the change in price per share, assuming the stock was in equilibrium before the changes?

  What is the current price of the stock

XYZ company is expected to pay an $8 dividend one year from now and a $2 dividend two years from now. Two years from now immediately after the $2 dividend was paid, you also expect to be able to sell the stock at $16.50. If you have a required rate o..

  Difference between individual and organizational ethics

What is the difference between individual and organizational ethics? Why is it important that we understand that difference in a business environment?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd