1. You just started your new position at a large investment bank. You have been assigned to help a senior analyst, Ms. Jones, on a Dutch Auction of shares for Thornton & Danaher Inc. The equity of the firm is currently closely held by the founding families and the senior managers, so there is no available market price. They are hoping to raise about $560,000,000. This represents about 40% of the firm’s current equity value. Ms. Jones has estimated that the firm equity is currently worth about $1,400,000,000 ($560,000,000 is about 40%). They have decided to auction 8,150,000 shares, which will hopefully sell for about $70 per share. Thornton & Danaher will receive the proceeds from the sale of 8,000,000 of the shares, and your investment bank will receive the proceeds from the remaining 150,000 shares (a 1.84% commission).
Your firm pitched the issue to several large private equity clients. Fourteen sealed bids were submitted, and you have sorted them by bid price. The results are shown below.

Bidder Price    Shares
A       $85.74 680,000
B       $84.52 710,000
C       $79.94 850,000
D       $78.86 1,500,000
E       $78.73 1,250,000
F          $76.59 1,200,000
G       $74.17 1,550,000
H       $72.36 1,400,000
I          $71.26 850,000
J          $69.48 2,100,000
K       $68.39 1,800,000
L          $68.24 2,300,000
M       $66.84 1,750,000
N       $65.59 1,500,000

What marginal price will the 8,150,000 shares of Thornton & Danaher sell at in the Dutch Auction? Also, calculate the pro rata portion of shares each of the winning bidders will receive for the number of shares they bid.
How much money will Thornton & Danaher receive from the auction? What will your investment bank receive?

2. You work in the Finance Department for Flynn, Inc. Your firm needs to raise $7,500,000,000 ($7.50B) to finance new capital investments. Your boss is considering raising this capital using a rights offering. He has asked you to analyze the effect of such an offering on the firm’s shareholders.
The firm has 852,000,000 shares outstanding. These are currently selling on the stock exchange for $45.37. The estimated net earnings for the firm are $2,845,921,000.
Calculate the current market value of firm equity and the Earnings per Share (EPS).
To raise the needed $7,500,000,000 in new capital, your boss is considering issuing new shares at a subscription price of $40 in the rights offering.
How many shares will the firm need to issue to raise the $7,500,000,000?
Calculate the number of rights that will be needed to purchase a new share.
During the subscription period, what will be the market value of a right?
After the rights offering, what will be the firm value? The number of outstanding shares?
The share price? The EPS?

3. You are employed in the Finance Division of a firm with 325,500,000 shares outstanding. The current share price is $26.24. The forecast earnings are $912,460,000.
Calculate the current market value of firm equity and the earnings per Share (EPS).
The firm has accumulated a fund of $198,573,845 in excess cash, and the directors want to pay-out these funds to the shareholders. You have been asked to compare the effects of a special one-time dividend and a share repurchase.
If the funds are paid out as a one-time dividend, what will be the dividend per share (DPS)? What will be firm value after the dividend? What will be the share price after the dividend? What will be EPS after the dividend?
If the firm executes a share repurchase, how many shares will be purchased at what price? How many shares will remain? What will be firm value after the repurchase? What will be the share price after the repurchase? What will be EPS after the repurchase?

1. You just started your new position at a large investment bank. Y...