=9. Some refer to common stock as an option on a company's assets. Do you see any logic to this statement? What is the logic, if any?

10. Use the Standard and Poor's Market Insight website, www.mhhe.

com/edumarketinsight, for this problem. Assume that as of December 31, 2004, Fortune Brands, Inc., wants to raise $200 million in a new stock issue and that JP Morgan, the company's investment banker, believes the issue will require 6 percent underpricing and a 7 percent spread. (The underpricing is 6 percent of the current stock price, and the spread is 7 percent of the issue price.)

a. Assuming the company's stock price does not change from its December 31, 2004 price, how many shares must the company sell and at what price to the public? (Consult Excel Analytics, Market Data, Monthly Adj. Prices.)

b. How much money will the investment banking syndicates earn on the sale?