Question

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?

Answer #1

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