ZuoTi.Pro
Question

ABC Company used an investment bank to do IPO. In IPO, the company sold 24,769 shares...

ABC Company used an investment bank to do IPO. In IPO, the company sold 24,769 shares at $65 each. The investment bank charged 7% spread. At the end of the 1st day of trading, ABC's stock price closed at $81.66.

What is the direct cost of the IPO to the company?

Enter your answer rounded off two decimal points. Do not enter $ in the answer box.

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Solution:-

Direct IPO costs include underwriter fee, legal fee, financial advisory fee, advertising, costs of IPO related documents, etc.

In the given question, investment banker's underwriting fee is 7% of proceeds. Let's calculate the cost as below:

IPO proceeds= No. of shares*Issue price = 24,769*$65 = $1,609,985

Underwriting fee= IPO proceeds*7% = $1,609,985*7%= $112,698.95

Thus, the direct IPO costs for the company is $112,698.95

0 0
Add a comment
Know the answer?
Add Answer to:
ABC Company used an investment bank to do IPO. In IPO, the company sold 24,769 shares...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • ABC Company used an investment bank to do IPO. In IPO, the company sold 32,494 shares...

    ABC Company used an investment bank to do IPO. In IPO, the company sold 32,494 shares at $65 each. The investment bank charged 6% spread. At the end of the 1st day of trading, ABC's stock price closed at $103. What is the indirect cost of the IPO to the company? Do not enter $ in the answer box.

  • An online medical advice company just completed an IPO with an investment bank on a firm-commitment...

    An online medical advice company just completed an IPO with an investment bank on a firm-commitment basis. The firm issued five million shares of common stock, and the underwriting fees were $2.00 per share. The offering price was $25.00 per share. What were the total proceeds from the common-stock sale? Total proceeds $ How much money did the company receive? Net proceeds to firm $ How much money did the investment bank receive in fees? Underwriting spread $

  • An online medical advice company just completed an IPO with an Investment bank on a firm-commitment basis.

    An online medical advice company just completed an IPO with an Investment bank on a firm-commitment basis. The firm issued five million shares of common stock, and the underwriting fees were $2.20 per share. The offering price was $27.30 per share. What were the total proceeds from the common-stock sale? Total proceeds _______ How much money did the company receive? Net proceeds to firm _______ How much money did the investment bank receive in fees? Underwriting spread _______ 

  • Question 12 An online medical advice company just completed an IPO with an investment bank on...

    Question 12 An online medical advice company just completed an IPO with an investment bank on a firm-commitment basis. The firm issued five million shares of common stock, and the underwriting fees were $2.60 per share. The offering price was $25.40 per share. What were the total proceeds from the common-stock sale? Total proceeds How much money did the company receive? Net proceeds to firm $ How much money did the investment bank receive in fees? Underwriting spread Click if...

  • Moonscape has just completed an initial public offering. The firm sold 4 million shares at an...

    Moonscape has just completed an initial public offering. The firm sold 4 million shares at an offer price of $12 per share. The underwriting spread was $0.40 a share. The price of the stock closed at $18.00 per share at the end of the first day of trading. The firm incurred $400,000 in legal, administrative, and other costs. What were flotation costs as a fraction of funds raised? (Do not round intermediate calculations. Enter your answer as a percent rounded...

  • Moonscape has just completed an initial public offering. The firm sold 1 million shares at an...

    Moonscape has just completed an initial public offering. The firm sold 1 million shares at an offer price of $10 per share. The underwriting spread was $0.60 a share. The price of the stock closed at $16.00 per share at the end of the first day of trading. The firm incurred $200,000 in legal, administrative, and other costs. What were flotation costs as a fraction of funds raised? (Do not round intermediate calculations. Enter your answer as a percent rounded...

  • The MEP company has issued 5,020,000 new shares. Its investment bank agrees to underwrite these shares...

    The MEP company has issued 5,020,000 new shares. Its investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 4,220,000 shares for $56 per share. It charges MEP $1.35 per share sold. a. How much money does MEP receive? (Do not round intermediate calculations. Enter your answer in dollars, not in millions.) b. What is the investment bank’s profit? (Enter your answer in dollars, not in millions.) c. What is the...

  • The MEP company has issued 5,000,000 new shares. Its investment bank agrees to underwrite these shares on a best efforts...

    The MEP company has issued 5,000,000 new shares. Its investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 4,200,000 shares for $54 per share. It charges MEP $1.25 per share sold. a. How much money does MEP receive? (Do not round intermediate calculations. Enter your answer in dollars, not in millions.) b. What is the investment bank’s profit? (Enter your answer in dollars, not in millions.) c. What is the...

  • ABC Company sells 37,029 chairs a year. The carrying cost per unit is $5.22 and the...

    ABC Company sells 37,029 chairs a year. The carrying cost per unit is $5.22 and the fixed costs per order are 35.25 per order. The company orders 397 units each time. The chairs are sold out before they are restocked. What is the economic order quantity? Enter your answer rounded off to two decimal points. Do not enter comma in the answer box.

  • XYZ, Inc. has issued 10 million new shares of stock. An investment bank agrees to underwrite...

    XYZ, Inc. has issued 10 million new shares of stock. An investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 8.4 million shares for $27 per share, and it charges XYZ $0.675 per share sold. a. How much money does XYZ receive? (Enter your answer in dollars, not in millions. Do not round intermediate calculations.) b. What is the profit to the investment bank? (Enter your answer in dollars, not...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT