Cemtrex Inc, a tech company involved in virtual reality, conducted a Seasoned Equity Offering (SEO) through...

Cemtrex Inc, a tech company involved in virtual reality, conducted a Seasoned Equity Offering (SEO) through rights offer on November 2018. The rights offer consisted in that for every 3 shares of Cemtrex an investor already owned, he or she could buy 1 more share at a discounted price of $1.06, the price of Cemtrex’s shares on the day of the SEO was $1.30. The SEO creates dilution — since it increases the number of shares, the value of each share decreases — but by doing it through a rights offer this dilution is potentially canceled. (a) Before the SEO, there were 8.5 million total shares of Cemtrex. Find the market capitalization (price × shares) of Cemtrex prior to the SEO. (b) Find the market capitalization of Cemtrex after the SEO, assume everyone participated to the full extend in the rights offer.1 (c) Find the new stock price for Cemtrex after the SEO (remember that market cap. = price × shares). 1Note: The market capitalization after the SEO is the old market cap. plus the funds raised through the SEO. Page 1 of 5 (d) Suppose that prior to the SEO you owned 300,000 shares of Cemtrex, so you are entitled to buy 100,000 shares at the discounted price. Compute the loss in value in the shares you owned prior to the SEO (these decreased in value from $1.30 to the new price), and show it exactly cancels out with the gain in value of the shares you bought in the rights offer for $1.06. (e) Show that your voting rights were not changes by the SEO; that is, you own the same percentage of shares outstanding before and after the SEO.

Expert Solution


	A	Total Number of shares before SEO	8,500,000
	B=A/3	Number of rights	2,833,333
	C=B*1.06	Fund raised through SEO	$3,003,333
(a)	D=A*1.30	Market cap before SEO	$11,050,000
(b)	E=C+D	Market cap AFTER SEO	$14,053,333
	F=A+B	Number of shares After SEO	11,333,333
.(c)	G=E/F	New Stock Price after SEO	$1.24

	(d)	CALCULATION OF LOSS IN VALUE
	I	Number of share held before SEO	300,000
	J=I*1.30	Market value before SEO	$390,000
	K=I*1.24	Market value AFTER SEO	$372,000
	L=J-K	Loss in Value	$18,000

		CALCULATION OF GAIN IN VALUE
	M=I/3	Number of right shares bought	100,000
	N=M*1.24	Market Value of right shares	$124,000
	P=M*1.06	Amount paid for the right shares	$106,000
	Q=N-P	Gainin value in right shares	$18,000

	(e)	Percentage shares owned before SEO	3.5294%	(300000/8500000)
	R=I+M	Number of shares owned after SEO	400,000
	S=A+B	Total number of shares after SEO	11,333,333
	T=R/S	Percentage shares owned AFTER SEO	3.5294%
		NO CHANGE IN VOTING RIGHTS

jeff jeffy answered 1 year ago

Luther Industries sold 10 million shares of stock in a seasoned equity offering. The market price...

Luther Industries sold 10 million shares of stock in a seasoned equity offering. The market price of Luther at the time was $25 per share. Of the 10 million shares sold, 6 million shares were primary shares being sold by the company, and the remaining 4 million shares were being sold by venture capitalists. Luther's underwriters charges 5% of the total funds raised as an underwriting fee. (a) How much money did Luther Industries company raise? (4 pts.) (b) How...

3D Productions is considering a new packaging design for the virtual reality goggles the company produces....

3D Productions is considering a new packaging design for the virtual reality goggles the company produces. Management estimates that the new design will result in the following probabilities for possible effects on the firm's current estimate of annual sales of $8 million: Probability .05 .20 .40 .20 .15 Change in Sales ( 30,000) 40,000 100,000 150,000 250,000 The machinery required to incorporate the new design in the packaging is priced at $600,000. Since the new machine is technically superior to...

1. Olympic Enterprises Inc. owns recreation centers with virtual reality games. The entity constantly needs to...

1. Olympic Enterprises Inc. owns recreation centers with virtual reality games. The entity constantly needs to upgrade its arcades and fun centers with the latest releases. The bank requires a compensating balance of 15 percent on a $100,000 loan. If the stated annual interest race is 6 percent, what is the effective cost of the loan co Olympic Enterprises? (A) 7.05 percent (B) 6.69 percent (C) 6 percent (D) 7.8 percent ................. 2. . The required race of return is...

Australian company Too Cool has developed two new virtual reality games based on The Hunger Games...

Australian company Too Cool has developed two new virtual reality games based on The Hunger Games and X-Men movie franchises and wants to market these offshore. Select one country and develop an international promotion strategy for the company’s entry into that country. In particular, consider the following: • Culture • the consumer behavior/buying process, • levels of economic development and • constraints such as media availability and language. In your response, consider the different promotional tools that could be used...

Please provide explanations and calculations. Top Tech, Inc. Stockholders' Equity Section at the end of last...

Please provide explanations and calculations. Top Tech, Inc. Stockholders' Equity Section at the end of last year was as follows: Paid In capital: Preferred Stock, 150,000 Shs. Authorized, 80,000 Outstanding, $20 Par, 6% divdend rate 1,600,000 Common Stock, 70,000 Shs. Issued and Outstanding, $10 Par 700,000 Total Paid in Capital 2,300,000 Retained Earnings 324,500 Total Stockholders' Equity 2,624,500 Req. #1, give general journal entries for the following transactions that took place this year: 1 Sold 5,000 shares of Pfd. Stock...

(A) Is it better to finance a company through debt or equity? Why?

Please provide calculations and explainations. Thank You! Top Tech, Inc. Stockholders' Equity Section at the end...

Please provide calculations and explainations. Thank You! Top Tech, Inc. Stockholders' Equity Section at the end of last year was as follows: Paid In capital: Preferred Stock, 200,000 Shs. Authorized, 20,000 Outstanding, $15 Par,% dividend rate 300,000 Common Stock, 60,000 Shs. Issued and Outstanding, No Par 2,200,000 Total Paid in Capital 2,500,000 Retained Earnings 554,300 Total Stockholders' Equity 3,054,300 Req. #1, give general journal entries for the following transactions that took place this year: 1 Bought back 1,000 shs of...

XYZ purchased $100,000 equity interest in Z-Tech, Inc, on January 1, 2020. On November 30. 2020,...

XYZ purchased $100,000 equity interest in Z-Tech, Inc, on January 1, 2020. On November 30. 2020, Z-Tech paid dividends of $3,000 to XYZ. At December 31, 2020, XYZ's holdings in Z-Tech is valued at $101,000. Prepare the entries necessary to record (1) the purchase of the investment, (2) the receipt of dividends and (3) year-end adjusting entry assuming that XYZ uses the Available for Sale method to account for this investment.

The owners of CSC Inc., a privately held company, are considering a public offering of the...

The owners of CSC Inc., a privately held company, are considering a public offering of the company’s common stock as a means of acquiring additional funds. Prior to making a decision about a public offering, the owners want to have a lengthy conversation with you, CSC’s chief financial officer. You have already informed the owners of the reporting requirements of the Securities and Exchange Commission, including the necessity for audited financial statements. Now the owners wish to discuss with you...

Salo inc. has assets in place that are financed through debt for $245,000,000 and equity for...

Salo inc. has assets in place that are financed through debt for $245,000,000 and equity for $53,000,000. At the moment the return on equity is 15% and the company keeps a constant debt-to-equity policy. The company plans to start a new project that will be managed separately from the other company's operations. The project has a 5-year life. The company needs to acquire new assets for $45,000,000. The company thinks to adopt a constant debt policy for this project and...

Question