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Katie Homes and Garden Co. has 14,800,000 shares outstanding. The stock is currently selling at $82 per share. If an unfriendly outside group acquired 30 percent of the shares, existing stockholders will be able to buy new shares at 35 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

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Answer:

A. $4,440,000

B. $53.30

Explanation:

A. Calculation for How many shares must the unfriendly outside group acquire for the poison pill to go into effect

Number of shares = $14,800,000*30%

Number of shares=$4,440,000

Therefore the numbers of shares that must the unfriendly outside group acquire for the poison pill to go into effect is $4,440,000

b. Calculation for What will be the new purchase price for the existing stockholders

New purchase price = 82*(1-0.35)

New purchase price = $53.30

Therefore the new purchase price for the existing stockholders is $53.30

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