Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by...

Question

Question

Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by...

Profit or Loss on New Stock Issue

Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows:

Price to public:	$5 per share
Number of shares:	3 million
Proceeds to Beedles:	$14,000,000

The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $490,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price?

$5 per share? Use minus sign to enter loss, if any.
$
$6.75 per share? Use minus sign to enter loss, if any.
$
$4.25 per share? Use minus sign to enter loss, if any.

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

a. Price to Public = $5 per share

Number of Shares = 3 million

Proceeds to Security Brokers = 5*3 = $15million

Expenses = $490000

Net Proceeds = $15million - $490000 = $14.51 million

Proceeds to Beedles = $14 million

Profit = $14.51 million -$14million = $0.51 million

b.

Price to Public = $6.75 per share

Number of Shares = 3 million

Proceeds to Security Brokers = 6.75*3 = $20.25million

Expenses = $490000

Net Proceeds = $20.25million - $490000 = $19.76 million

Proceeds to Beedles = $14 million

Profit = $19.76 million -$14million = $5.76 million

c.

Price to Public = $4.25 per share

Number of Shares = 3 million

Proceeds to Security Brokers = 4.25*3 = $12.75million

Expenses = $490000

Net Proceeds = $12.75million - $0.49 = $12.26 million

Proceeds to Beedles = $14 million

Loss = $14 million -$12.26million = $1.74 million

Add a comment

Answer 2

Similar Homework Help Questions

Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by...

Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public: Number of shares: Proceeds to Beedlest $5 per share 3 million $14,000,000 e s t The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $340,000. What profit or loss would Security Brokers incur the b public at the following average...
Problem 18-01 Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new...

Problem 18-01 Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public: $5 per share Number of shares: 3 million Proceeds to Beedles: $14,000,000 The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $290,000. What profit or loss would Security Brokers incur if the issue were sold to the public...
Problem 18-01 Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new...

Problem 18-01 Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public: $5 per share Number of shares: 3 million Proceeds to Beedles: $14,000,000 The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $450,000. What profit or loss would Security Brokers incur if the issue were sold to the public...

Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of...

Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public: $5 per share Number of shares: 3 million Proceeds to Beedles: $14,000,000 The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $310,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price? A) $4.75 per share?...
A company is planning a new plant and needs to raise (net of underwriting cost) $14.25...

A company is planning a new plant and needs to raise (net of underwriting cost) $14.25 million to finance it. The company plans to raise the money through a general cash offering priced at an offer price of $5 a share. The underwriters charge a 5 per cent spread. How many shares does the company have to sell to achieve its goal (in millions to three decimal places)? (Hint: required amount/(1-spread) = issue amount) Select one: a. 3.000 b. 15.789...
Deere and Bros. is a broker that brings new issues of small firms to the public...

Deere and Bros. is a broker that brings new issues of small firms to the public market. Its most recent deal for Sheridan, Inc., had the following characteristics: Number of shares: 1,300,000 Proceeds to Sheridan: $12,300,000 Price to public: $18 per share The legal fees were $151,000, printing costs were $55,000, and all the other expenses were $71,500. What is the profit or loss for Deere and Bros.?

EcoTours, Inc.'s perpetual preferred stock currently trades at $98.50 per share, and it pays a $1.95...

EcoTours, Inc.'s perpetual preferred stock currently trades at $98.50 per share, and it pays a $1.95 quarterly dividend. If the company were to sell a new preferred issue, it would incur flotation costs of 6.00% of the issue price. What is EcoTours' cost of preferred stock? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.13456 or 13.456% then enter as 13.46 in the answer...
When companies offer new equity security issues, they publicize the offerings in the financial press and...

When companies offer new equity security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the equity offerings reported in December 2018: New Securities Issues Equity American Materials Transfer Corporation (AMTC) 4.0 million common shares, $0.001 par, priced at $12.980 each through underwriters led by Second Tennessee Bank N.A. and Morgan, Dunavant & Co., according to a syndicate official Proactive Solutions Inc. (PSI)-Offering of 9 million common shares, $0.01 par, was...
An investment bank agrees to underwrite an issue of 14 million shares of stock for Looney...

An investment bank agrees to underwrite an issue of 14 million shares of stock for Looney Landscaping Corp. a. The investment bank underwrites the stock on a firm commitment basis, and agrees to pay $17.50 per share to Looney Landscaping Corp. for the 14 million shares of stock. The investment bank then sells those shares to the public for $19.25 per share. How much money does Looney Landscaping Corp. receive? What is the profit to the investment bank? If the...

An investment bank agrees to underwrite an issue of 12 million shares of stock for Looney...

An investment bank agrees to underwrite an issue of 12 million shares of stock for Looney Landscaping Corp. a. The investment bank underwrites the stock on a firm commitment basis, and agrees to pay $20.00 per share to Looney Landscaping Corp. for the 12 million shares of stock. The investment bank then sells those shares to the public for $21.75 per share. How much money does Looney Landscaping Corp. receive? What is the profit to the investment bank? If the...

Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by...

Homework Answers

Add Answer to:
Profit or Loss on New Stock Issue Security Brokers Inc. specializes in underwriting new issues by...

Post as a guest

Earn Coins