Question

Zimba Technology Corp. recently went public with an initial public offering of 1.9 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds were $7.60 per share and the underwriter’s spread was 5 percent of the gross proceeds. Zimba also paid legal and other administrative costs of $264,000 for the IPO.

Calculate the gross proceeds per share. (Round your answer to 2 decimal places.)

Gross proceeds

$  per share

Calculate the total funds received by Zimba from the sale of the 1.9 million shares of stock. (Enter your answer in millions of dollars rounded to 3 decimal places.)

Funds received by Zimba

$  m

Answer 1

Gross Proceeds per share = $8.00 per share

Gross Proceeds per share

Gross proceeds = Underwriters spread + Net Proceeds

Gross proceeds = [ 0.05 x Gross proceeds ] + $7.60

Gross proceeds – 0.05 Gross Proceeds = $7.60

0.95 Gross Proceeds = $7.60

Gross proceeds = $7.60 / 0.95 = $8.00 per share

Total funds received by Zimba Technology Corp=

Total funds received by Zimba Technology Corp

= [ Number of shares x net proceeds per share ] - Legal and other administrative expenses

= [1.9 million shares x $7.60 per share ] - $0.264 million

= $14.44 million - $0.264 million

= $14.176 million