Question :
Sea Grove Beach Corporation
Sea Grove Beach Corporation executing an initial : 1325728
Sea Grove Beach Corporation
Sea Grove Beach Corporation is executing an initial public offering with the following characteristics. The company will sell 12 million shares at an offer price of $20 per share, the underwriter will charge a 7 percent underwriting fee, and the shares are expected to sell for $27.50 per share by the end of the first day’s trading. Assuming this IPO is executed as expected.
53.Refer to Sea Grove Beach Corporation. What is the initial return earned by investors allocated shares in the IPO?
a.20.27%
b.27.27%
c.30.50%
d.37.50%
54.How much will Sea Grove Beach Corporation receive from the offering?
a.$6.30 million
b.$223.20 million
c.$240.50 million
d.$306.90 million
55.What is the total cost (underwriting fee and underpricing) of this issue to Sea Grove Beach Corporation?
a.$6.30 million
b.$16.80 million
c.$106.80 million
d.$125.00 million
56.Montigo Magic Petroleum Corporation is interested in selling common stock to raise capital for a new oil well. The firm has contacted First Bank of Manhattan, a large underwriting firm, which believes that the stock can be sold for $40 per share. The underwriter also believes, after careful research, that its administrative costs will be 2.75 percent of the sale price and its selling costs will be 2.40 percent of the sale price. If the underwriter requires a profit equal to 1.25 percent of the sale price, how much will the spread have to be in dollars to cover the underwriter’s costs and profit?
a.$0.64
b.$1.80
c.$2.16
d.$2.56
Sea Grove Beach Company
Sea Grove Beach Company needs to raise $30 million of new equity capital. Its common stock is currently selling for $44 per share. The investment bankers require an underwriting spread of 7 percent of the offering price, and the company’s legal, accounting, and printing expenses associated with the seasoned offering are estimated to be $500,000.
57.Refer to Sea Grove Beach Company. How many new shares must the company sell to net $30 million?
a.745,357
b.745,857
c.746,127
d.746,327
58.What is the net price per share that Sea Grove Beach Company will receive from this offering?
a.$40.24
b.$40.92
c.$42.24
d.$43.93
Panama City Beach Company
Panama City Beach Company needs to raise $60 million of new equity capital. Its common stock is currently selling for $70 per share. The investment bankers require an underwriting spread of 5 percent of the offering price, and the company’s legal, accounting, and printing expenses associated with the seasoned offering are estimated to be $200,000.
59.What is the net price per share that Panama City Beach Company will receive from this offering?
a.$66.00
b.$66.20
c.$66.50
d.$67.00
60.Refer to Panama City Beach Company. How many shares must be sold to net $60 million?
a.905,263
b.902,256
c.885,715
d.857,143
Brooks Corporation
Brooks Corporation has just received $40 million in net proceeds from a seasoned offering. The offering was underwritten by ABC Investments, an investment bank that focuses on small company offerings. For the offering, 8 million shares of stock were issued and the underwriting expenses for ABC Investments were $800,000.
61.Refer to Brooks Corporation. For ABC Investments to make a profit on this offering, what is the minimum price they must sell the stock for on the secondary market?
a.$5.00
b.$5.04
c.$5.10
d.$5.15
62.Refer to Brooks Corporation. ABC Investments is able to sell the stock on the secondary market at $6.00. What is the profit for ABC Investments for underwriting this seasoned offering?
a.$7.2 million
b.$7.6 million
c.$8.0 million
d.$8.8 million