The Boat Works decided to go public by offering a total of 135,000 shares of common stock to the public. The company hired an underwriter who arranged a firm commitment underwriting and an initial selling price of $24 a share with a spread of 8.3 percent. As it turned out, the underwriters only sold 122,400 shares to the public. What is the amount paid to the issuer

Question

Dudley

Business

15 September, 01:16

The Boat Works decided to go public by offering a total of 135,000 shares of common stock to the public. The company hired an underwriter who arranged a firm commitment underwriting and an initial selling price of $24 a share with a spread of 8.3 percent. As it turned out, the underwriters only sold 122,400 shares to the public. What is the amount paid to the issuer

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Donovan Armstrong · Answer 1

The amount paid to the issuer is $2,971,080.

Explanation:

The total number of shares is 135,000.

Though only 122,400 shares are sold to the public.

The initial selling price is $24.

The spread percentage is given at 8.3%.

The amount paid to the issuer will be

=Total number of shares*Initial selling price (1-spread)

=135,000*24 * (1-0.083)

=135,000*24*0.917

=2,971,080

So, the amount paid to the issuer is $2,971,080.