Question

An investment bank offers underwrites an IPO of up to 18.5m shares for ABC Company at...

An investment bank offers underwrites an IPO of up to 18.5m shares for ABC Company at a price of $12.50 per share. Show the $ return to the investment bank under both scenarios: 1. The 18.5m shares sell at $13.25 per share. 2. What happens if the IPO price is overstated and the shares sell for $12.25 per share?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Underwriting value = $12.5 x 18.5 million = $231.25 million

Return to the investment bank = Sale proceeds from IPO - Underwriting value

(1)

Sale proceeds from IPO = $13.24 x 18.5 million = $244.94 million

Return to the investment bank = $(244.94 - 231.25) million = $13.69 million

(2)

Sale proceeds from IPO = $12.25 x 18.5 million = $226.625 million

Return to the investment bank = $(226.625 - 231.25) million = - $4.625 million

In this case the investment bank incurs a loss.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An investment bank offers underwrites an IPO of up to 18.5m shares for ABC Company at...
An investment bank offers underwrites an IPO of up to 18.5m shares for ABC Company at a price of $12.50 per share. Show the $ return to the investment bank under both scenarios: 1. The 18.5m shares sell at $13.25 per share. 2. What happens if the IPO price is overstated and the shares sell for $12.25 per share?
Answer the following questions for a fictitious public offering, and show all calculations: a. An investment...
Answer the following questions for a fictitious public offering, and show all calculations: a. An investment bank offers underwriters an IPO of up to 19m shares for ABC Company at a price of $12.75 per share. Show the $ return to the investment bank under both scenarios: i The 19m shares sell at $13.50 per share. ii What happens if the IPO price is overstated and the shares sell for $12.25 per share?
An investment bank (IB) agrees to place 5 million new IPO                  shares for BankMed on...
An investment bank (IB) agrees to place 5 million new IPO                  shares for BankMed on a best effort basis, with a retainer                  fee of $1 million and a success fee of $1.25 per share sold            a) If the IB was able to sell 4,200,000 IPO shares for $54                  a share , what are the total revenues of the IB and how much                     does BankMed receives?               b) Would BankMed be better off with...
You work for an investment bank that underwrites technology IPOs. Firms in this sector can be...
You work for an investment bank that underwrites technology IPOs. Firms in this sector can be either good or bad. Good firms are worth $30 per share and bad firms are worth $20 per share. There is an equal proportion of good firms and bad firms in the economy. That is, with 50% probability, an IPO is a good IPO and its opening price is $30 at the start of trading, and with 50% probability, an IPO is a bad...
You work for an investment bank that underwrites technology IPOs. Firms in this sector can be...
You work for an investment bank that underwrites technology IPOs. Firms in this sector can be either good or bad. Good firms are worth $30 per share and bad firms are worth $20 per share. There is an equal proportion of good firms and bad firms in the economy. That is, with 50% probability, an IPO is a good IPO and its opening price is $30 at the start of trading, and with 50% probability, an IPO is a bad...
XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at...
XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at $61.7 each. The investment bank charged 7% spread. At the end of the 1st day of trading, XYZ stock price closed at $76.08. Calculate the total cost of IPO. That is, what is the sum of direct and indirect cost?
XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at...
XYZ used an investment bank to do IPO. In IPO, XYZ sold 1 million shares at $69.46 each. The investment bank charged 7% spread. At the end of the 1st day of trading, XYZ stock price closed at $71.05. Calculate the total cost of IPO. That is, what is the sum of direct and indirect cost? XYZ is a retailer and sells 183,000 units per year. It purchases from a single supplier. Fixed costs per order are $821 and carrying...
A company is doing a share offering underwritten by an investment bank. The company plans to...
A company is doing a share offering underwritten by an investment bank. The company plans to issue 650,000 shares at a market price of $23.7 per share. The investment bank offers stand-by underwriting at a fee of 6% of the total amount raised. a)    If the company receives subscriptions for 100% of the total shares offered, calculate how much the company would receive from the IPO. (Round your answer to the nearest dollar. Do not include the $ symbol. Do not...
Question 2 (1 Point) An investment bank pays $22.50 per share for 5 million shares of...
Question 2 (1 Point) An investment bank pays $22.50 per share for 5 million shares of CODIAK in a firm commitment stock offering. It then can sell those shares to the public for $25 per share. How much money does CODIAK receive? What is the profit to the investment bank? What is the stock price of CODIAK? Question 3 (1 point) The RAP company has issued 7,000,000 new shares. Its investment bank agrees to underwrite these shares. The investment bank...
1. ABC Ltd, a high-technology company, issues a $23 million IPO with an offer price of...
1. ABC Ltd, a high-technology company, issues a $23 million IPO with an offer price of $3 per share, underwritten at $2.82 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $380,000. The company's share price increases by $0.45 on the first day. What is the company's total cost of issuing the securities (in millions of dollars to three decimal places; don’t use $ sign eg $4.5766 million is 4.577)? (Remember to round the number...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT