Question
1.Penny Furnishing Company issues a $45 million IPO and the offer price to the public is $25 per share. It is underwritten at $24.50 per
1.Penny Furnishing Company issues a $45 million IPO and the offer price to the public is $25 per share. It is underwritten at $24.50 per share. The firm's legal fees, ASIC registration fees, and other administrative costs are $350,000. The firm's stock price increases to $25.50 on the first day. Calculate the total cost to the firm of issuing the securities? (5 marks)
2.Elite Corporation, a microchip manufacturer, is planning to open a new factory and needs to raise $20 million to finance it. The company plans to raise the money through an IPO at an offer price of $15 a share. The underwriter spread is 5 percent. How many shares does the company have to sell to achieve its goal? (3 marks)
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