Problem
Kahuku Corporation has 100 million shares outstanding trading at $20 per share. The company announces its intention to raise $150 million by selling new shares.
a. What do market signaling studies suggest will happen to Kahuku's stock price on the announcement date? Why?
b. How large a gain or loss in aggregate dollar terms do market signaling studies suggest existing Kahuku shareholders will experience on the announcement date?
c. What percentage of the value of Kahuku's existing equity prior to the announcement is this expected gain or loss?
d. At what price should Kahuku expect its existing shares to sell immediately after the announcement?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.