Describe the role that the “winner’s curse” may play in the underpricing of IPOs….

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  1. Describe the role that the “winner’s curse” may play in the underpricing of IPOs.
    (5 marks)

  1. (5 marks)
  1. Does a rights offer cause a share price decrease? Why or why not?
  1. How are existing shareholders affected by a rights offer? Illustrate your answer with an example.

  1. TUV Guy Inc. is proposing a rights offering. There are currently 240,000 shares outstanding at $80 each. There will be 60,000 new shares offered at $60 each.
    (10 marks)
  1. What is the new market value of the company?
  1. How many rights are associated with one of the new shares?
  1. What is the value of a right?
  1. What is the ex-rights price per share?
  1. Why might a company have a rights offering rather than a general cash offer?

WXYZ Co. has concluded that additional equity financing will be needed to expand operations, and that the needed funds will b

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