CorporateFinanceLectureNote1.pptVIP

Corporate Finance Lecture Note 1 * New Equity Issues Let’s pull these numbers together, and see what happens if the management knows that the state is likely to be good or bad, and they are acting on behalf of the old shareholders: Old shareholder payoffs: Do Nothing Issue Equity Good news $250.00 $229.31 Bad news $130.00 $150.69 Corporate Finance Lecture Note 1 * New Equity Issues The equilibrium payoffs: Do Nothing Issue Equity Good news $250.00 Bad news $230 Corporate Finance Lecture Note 1 * New Equity Issues The optimal strategy for old equity is t