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Suppose that Mars, a large private company, is planning to do an IPO. The company currently...

Suppose that Mars, a large private company, is planning to do an IPO. The company currently has 40 million shares outstanding, and with the help of its lead underwriter, Morgan Stanley, Mars has decided to issue 5 million shares priced at $30 each. In addition, the company has agreed to a typical overallotment provision of 15% and an underwriting fee of 7%.

How much will capital will Mars receive from the IPO?

155.425 mil

160.425 mil

165.425 mil

170.425 mil

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Answer #1

Amount raised = price*shares*(1+overallment provision)*(1-underwriting fee)

=40*30*(1+0.15)*(1-0.07) = 160.425

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