Ask Question
BusinessBusiness
2 May, 10:18

Stump, Inc., a technology firm in Prairie View, Texas, issues a $66 million IPO priced at $17 per share, and the offering price to the public is $22 per share. The firm's legal fees, SEC registration fees, and other administrative costs are $350,000. The firm's stock price increases 15 percent on the first day.

a.) What is the underpricing spread?

b.) What is the underpricing on this issue?

c.) What is the firm's total cost of issuing the securities?

+2
Answers (1)
  1. 2 May, 10:40
    0
    A) What is the underpricing spread? $15,000,000

    B) What is the underpricing on this issue? $9,900,000

    C) What is the firm's total cost of issuing the securities? $25,250,000

    Explanation:

    The total number of shares issued = $66,000,000 / $22 = 3,000,000 shares

    A) The underpricing spread = (public price - issuing price) x 3,000,000 = ($22 - $17) x 3,000,000 = $5 x 3,000,000 = $15,000,000

    B) Since the shares' price increased 15%, then the underpricing on this share issue = ($22 x 1.15%) x 3,000,000 = $3.30 x 3,000,000 = $9,900,000

    C) the total cost of issuing shares = underpricing spread + underpricing of the shares + administrative costs = $15,000,000 + $9,900,000 + $350,000 = $25,250,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Stump, Inc., a technology firm in Prairie View, Texas, issues a $66 million IPO priced at $17 per share, and the offering price to the ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers
You Might be Interested in
How do environmental laws affect business
Answers (1)
A loss is when: A. Revenue is greater than expenses. B. Revenue is less than expenses. C. Revenue is equal to expenses. D. None of the above. pe here to search
Answers (1)
Effective product promotion requires that everyone who creates and manages promotional messages have free access to information about the customer, the product, the competition, the market, and the organization's strategy. TRUE OR FALSE?
Answers (1)
Coolaire is the only firm producing refrigerators. It costs $950 to produce a refrigerator, and Coolaire sells each refrigerator for $1,200.
Answers (1)
Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham Bonds. Using the U. S. tax rate schedule for year 2014, how much federal tax will he owe? A. $15,000.00 B. $12,375.00 C. $10,856.
Answers (1)
New Questions in Business
Which of the following characteristics would lead the auditor to assess control risk at a higher level? a. It is difficult for the auditor to determine or gain access to the organization or individuals who own and/or control the entity. b.
Answers (1)
The reason for the Fed being set up as an independent agency of government is to:
Answers (1)
Headings in reports that describe the content of the section and may even give a conclusion about the section are called:
Answers (1)
Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building.
Answers (1)
Trueview video ads can be especially effective for driving what goals?
Answers (1)
Home » Business » Stump, Inc., a technology firm in Prairie View, Texas, issues a $66 million IPO priced at $17 per share, and the offering price to the public is $22 per share. The firm's legal fees, SEC registration fees, and other administrative costs are $350,000.
Sign Up Forgot Password?