Question

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 use comma separators. E.g. 123456)

Answer

b)    If the company only receives subscriptions for 95.5% 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 use comma separators. E.g. 123456)

Answer

c)    If the company only receives subscriptions for 95.5% of the total shares offered, calculate how much the investment bank would receive from the IPO. (Round your answer to the nearest dollar. Do not include the $ symbol. Do not use comma separators. E.g. 123456)

Answer

Answer 1

a)

Particulars	Calculation	Amount
Amount raised	650000 * 23.7	1,54,05,000
Less: Investment Banker fees	1,54,05,000 * 6%	9,24,300
	Net funds available	1,44,80,700

b)

Particulars	Calculation	Amount
Amount raised	650000 * 23.7 * 95.5%	1,47,11,775
Less: Investment Banker fees	1,47,11,775 * 6%	8,82,707
	Net funds available	1,38,29,068

c)

Investment banker fees = 650000 * 23.7 * 95.5% * 6%

                                   = 8,82,707