Katie Homes and Garden Co has 14500000 shares outstanding Th

Katie Homes and Garden Co. has 14,500,000 shares outstanding. The stock is currently selling at $76 per share. If an unfriendly outside group acquired 20 percent of the shares, existing stockholders will be able to buy new shares at 25 percent below the currently existing stock price.

a. How many shares must the unfriendly outside group acquire for the poison pill to go into effect? (Do not round intermediate calculations.)

Number of shares ___________

b. What will be the new purchase price for the existing stockholders? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

New Purchase Price ___________

Solution

Number of shares = total shares outstanding*shares acquired by outside group

14500000*20% = 2900000 shares

New Purchase Price = existing price*(1- % reduction in price)

76*(1-.25) = 57