Question

Northern Air would like to sell 4,300 shares of stock using Dutch auction underwriting. The bids...

Northern Air would like to sell 4,300 shares of stock using Dutch auction underwriting. The bids received are: Bidder Quantity Price A 850 $ 29.40 B 950 29.05 C 1,350 28.90 D 1,550 28.55 E 1,750 28.35 How much will the company raise in its offer? Ignore all flotation and transaction costs. Multiple Choice $170,115 $124,915 $126,420 $122,765 $124,270

Homework Answers

Answer #1

ANS $ 122765

In this case we need to find the last successful bid.

In order of Ranking, we would give shares to A, B, C, D.

The price offered by D is last successful bid. Since E has offered the lowest price and there are no shares to be given to E, his quoted price cannot be considered as a successful bid.

BID SHARES PRICE PREFERENCE
A 850 29.4 1
B 950 29.05 2
C 1350 28.9 3
D 1550 28.55 4
E 1750 28.35
TOTAL 6450
SALES ISSUED
BID SHARES
A 850
B 950
C 1350
D 1150
E 0
TOTAL 4300

Price to be received = 4300 shares * $ 28.55 = $ 122765

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