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The Wrigley Corporation needs to raise $32 million. The investment banking firm of Tinkers, Evers &...

The Wrigley Corporation needs to raise $32 million. The investment banking firm of Tinkers, Evers & Chance will handle the transaction.


a. If stock is utilized, 2,000,000 shares will be sold to the public at $17.75 per share. The corporation will receive a net price of $16.00 per share. What is the percentage underwriting spread per share? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

b. If bonds are utilized, slightly over 32,000 bonds will be sold to the public at $1,005 per bond. The corporation will receive a net price of $1,000 per bond. What is the percentage of underwriting spread per bond? (Relate the dollar spread to the public price.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c-1. Which alternative has the larger percentage of spread?

Stock
Bond

c-2. Is this the normal relationship between the two types of issues? Yes or no?

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