Question

An IPO is offered at? $6.75 per share for 2 million shares. The IPO underwriters had a spread of? 9%. What was the total fee paid to the? underwriters?

A.?$13,500,000

B.?$12,385,000

C.?$12,285,000

D.?$1,800,000

E.?$1,215,000

An IPO is offered at? $14 per share for 6 million shares. The IPO underwriters had a spread of? 7.5%. What proceeds did the firm receive from the? IPO?

A.?$90.3 million

B.?$77.7 million

C.?$6.3 million

D.?$84 million

E.?$75 million

Answer 1

Fees Paid to Underwriter/Share = Underwriter Spread * IPO offer price

Net Proceeds to IPO underwriters = Total IPO Proceeds - Total Fees paid to underwriter

Question 1

Fees paid to underwriter/share = 9% * $6.75 = $0.6075

Total fees = Fees paid to underwriter/share * Total shares issued = $0.6075 * 2,000,000 = $1,215,000 (Option E)--> Answer

QUESTION 2

Fees paid to underwriter/share = 7.5% * $14 = $1.05

Per Share net proceeds to firm = Issue price/share - Fees paid/share = $14 - $1.05 = $12.95 per share

Total proceeds to firm = $12.95 * 6,000,000 = $77,700,000 --> $77.7 mil (Option B)