Z&B Paints. future growth. IPO Question
Solution:-
The investment banker fee for an IPO of $45 million in size is 8.7%. The net proceeds to the issuer can be calculated as follows:
Net proceeds= Issue size - Investment banker fees - issue expenses
Net proceeds= Issue size - Investment banker fees - issue expenses
We know that the net proceeds required are $45 million. Therefore, we get the following equation:
45,000,000= Issue size - IB fee - 350,000
Issue size - IB fee = 45,350,000
Hence, the company needs an issue size that leaves $45.35 million after banker fees. Looking at the table, we see that the banker fee for the IPO issue size band of 40.0m-59.9m is 8.7%. We can see that for net proceeds of $45,350,000, the fee is 8.7% and the issue will fall in this band itself considering the net proceeds requirement of $45.45m and 8.7% rate analyzed together.
Therefore, putting IB fee as 8.7% of issue size, we get as follows:
Issue size - (Issue size*8.7%) = 45,350,000
Issue size= $49,671,412.9
Since, price per share is $30.4 per share, no. of shares are as follows:
No. of shares required to be issue= $49,671,412.9/$30.40 = 1,633,928 shares
Z&B Paints. future growth. IPO Question Z&B Paints, Inc., is going public next month to raise...
Electric Motors, Inc., is going public next month to raise the funds needed to finance the company’s future growth. The company estimates that it needs $45 million to support its expected growth. The underwriting fees charged by the selected investment banking firm are based on the schedule provided in the following table: Bonds Equity Issue Size ($ million) Straight Convertible Seasoned Issues IPOs Under 10.0 4.4% 8.8% 13.3% 17.0% 10.0 – 19.9 2.8% 8.7% 8.7% 11.6% 20.0 – 39.9 2.4%...