Question

In a fully underwritten offering a firm sells 1 million shares of stock through a fully underwritten offering. Their banker charged a $2.45 spread and sold the stock to the public at a price of $35 per share. The issuing firm also pays $250,000 in other direct costs to complete the sale. What is the firm's net proceeds per share from the sale? $33.55 $35.00 $32.30 $32.55

Answer 1

Answer:

The correct answer is $32.30

Explanation:

1 million shares sold at $35 per share equals to $35 million. $2.45 spread per share for 1 million is equal to $2.45 million and the firm also paid the $250,000 for other costs. With the spread added, that makes $2.7 million. If you subtract that from the total sales of $35 million, you get $32.3 million, so the firm's net proceedings come up to $32.30 per share for a million shares.

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