Question

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

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