Question

purchased merchandise from Bach

company

Related Problem The Financial Environment requires you to use spreadsheet file Cosxiue to solve this problem. You will need to e problen provide answers for cach question below and show your work Dicti ces charged by the investment banking firm for which you work are 65% for such issue sizes. In If your analysis indicates that Diction's stock can be sold for $40 per share, how many shares mus ion Publishin addition, it is estimated dhat Diction will incur $4,900 in other expenses related to the IPO be issued to mer the company the $500,000 it needs? H Suppose that Diction's investment banker charges 10% rather than 6.5%. Assuming that all other information given earlier is the same, how many shares must Diction issue in this situation to net the company the $500,000 it needs? Suppose that Diction's investment banker charges 8.2% rather than 65%. Assuming that all other information given earlier is the same, how many shares must Diction issue in this situation to nes the company the $500,000 it needs? Suppose everything is the same as originally presented, except Diction will incur $5,835 in other expenses rather than $4,900. In this situation, how many shares must Diction issue to ner the company the S500,000 it needs? e. Now suppose that Diction decides it only needs $450,000 to support its growth. In t investment banker charges 7% flotation costs, and Diction will incur only S3840 in other expense. How many shares must Diction issue to net the company the S450,000 it needs? All Rights Rescrved. May not be scanned, copied or daplicated, or posted to a publicly accessible website, in whole or in part

Answer 1

Answer (a) to (f):

Number of shares required = [(Amount needed + Other expenses) / (1 - Underwriting fees)] / Share price

Answers for all scenarios (a) to (f) are calculated as below in excel:

Total amount required Number of shares (A / Share price) Amount needed Other Expenses Underwirtingl Scenario N +O 1-F96 from share issue-(N-0)/Share price $500,000 $500,000 $500,000 $500,000 $450,000 $450,000 $4,900 $4,900 $4,900 $5,835 $3,840 $3,840 $504,900 $504,900 $504,900 $505,835 $453,840 $453,840 Fees (F96) 6.50% 10.00% 8.20% 6.50% 93.50% 90.00% 91.80% 93.50% 93.00% 93.00% 1- F%)-A $540,000.00 $561,000.00 $550,000.00 $541,000.00 $488,000.00 $488,000.00 $40.00 $40.00 $40.00 $40.00 $40.00 $32.00 13,500 14,025 13,750 13,525 12,200 15,250 7.00%

Excel with 'show formula'

Total amount required from share issue-(N + O)/ (1-F%)-Share price Number of shares (A/Share price) G2/H2 G3/H3 G4/H4 G5/H5 G6/H6 Scenario Amount needed (N) | Other Expenses (0) | N + O | Underwirting Fees (F96) | 1-F9 4900 4900 4900 5835 3840 3840 +C2+B2 0.065 +C3+B3 0.1 +C4+B4 0.082 -+C5+B5 0.06 +C6+B60.07 +C7+B7 0.07 1-E2 D2/F2 1-E3 -D3/F3 1-E4D4/F4 1-E5 D5/F5 1-E6D6/F6 450000 450000 32