Zelnor, Inc., is an all-equity firm with 120 million shares outstanding currently trading for $12.18...
50.1K
Verified Solution
Link Copied!
Question
Finance
Zelnor, Inc., is an all-equity firm with 120 million shares outstanding currently trading for $12.18 per share. Suppose Zelnor decides to grant a total of 12 million new shares to employees as part of a new compensation plan. The firm argues that this new compensation plan will motivate employees and is better than giving salary bonuses because it will not cost the firm anything. Assume perfect capital markets. a. If the new compensation plan has no effect on the value of Zelnor's assets, what will be the share price of the stock once this plan is implemented? b. What is the cost of this plan for Zelnor investors? Why is issuing equity costly in this case? a. If the new compensation plan has no effect on the value of Zelnor's assets, what will be the share price of the stock once this plan is implemented? If the new compensation plan has no effect on the value of Zelnor's assets, the new share price will be $ . (Round to the nearest cent.)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
