2,3and 4

The out-of-pocket expenses incurred by ecurity Brokers in the design and distribution of the issue were 5800,000. What profit or loss would Security Brokers incur if the issue were sold to the public at an average price of a $12 per share? b. S13 per share? c. $11 per share? 14-2 Underwriting and Flotation Expenses Tundra Engineering, whose stock price is now $32, needs to raise 540 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $31 per share because of signalling effects. The underwriters' compensation will be 6% of the issue price. The firm will also incur expenses in the amount of $110.000 How many shares must the firm sell to net 540 million after underwriting and flotation expenses? 14-3 Assume a company just sold 15,000,000 shares in an IPO for $12 per share. If the underwriter IPO Pricing took a 5% fee, and the company incurred $450,000 in legal and consulting costs: a. What net proceeds did the company and underwriters receive? b. How much money will be left on the table if at the end of the first day the stock closed at $157 at $11? Who benefits in each case? 14-4 J. Bourne Security Products (BSP) is a successful company, but it needs $200,000 in addi- New Blockletional funding to grow. JBSP and an angel investor agree the business is worth 500,000 and the angel has agreed to invest the $200,000 that is needed. There are currently 40,000 shares outstanding. What is a fair price per share and how many additional shares must JSP sell to the angel Because the stock will be sold directly to an investor, there is no sprend; assume other flotation costs are insignificant Intermediate Problems 5-9 145 Ele's Concrete Co. (ECC) currently has sales of $30 million and a net pront margin of 3% Dilution Management is contemplating expansion, which would lead to sales growth of a but would also require raising 54 million through an equity issue. ECC shares currently trade 14.75, and its underwriter believes that the market would be receptive to the trening at sis. The underwriter will charge 5.5%. If ECC currently has 3 million shares outstanding calculate Els before share issuance and after assume that sales mansion s altet share 14-2 Tundra Engineering, whose stock price is now $32, needs to raise $40 million in common Underwriting and stock. Underwriters have informed the firm's management that they must price the new issue Flotation Expenses to the public at 531 per share because of signalling effects. The underwriters' compensation will be 6% of the issue price. The firm will also incur expenses in the amount of 5110,000 How many shares must the firm sell to net $40 million after underwriting and flotation expenses? 14-3 Assume a company just sold 15,000,000 shares in an IPO for $12 per share. If the underwriter IPO Pricing took a 5% fee, and the company incurred $450,000 in legal and consulting costs: a. What net proceeds did the company and underwriters receive? b. How much money will be left on the table if at the end of the first day the stock closed at $157 at $11? Who benefits in each case? 14-4 J. Bourne Security Products (BSP) is a successful company, but it needs $200,000 in addi- New So t ional funding to grow. JUSP and an angel investor agree the business is worth $800,000 and the angel has agreed to invest the $200,000 that is needed. There are currently 40,000 shares outstanding. What is a fair price per share and how many additional shares must JBSP sell to the angel Because the stock will be sold directly to an investor, there is no spread; assume Intermediate other flotation costs are insignificant. Pohlam 19 The out-of-pocket expenses incurred by ecurity Brokers in the design and distribution of the issue were 5800,000. What profit or loss would Security Brokers incur if the issue were sold to the public at an average price of a $12 per share? b. S13 per share? c. $11 per share? 14-2 Underwriting and Flotation Expenses Tundra Engineering, whose stock price is now $32, needs to raise 540 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $31 per share because of signalling effects. The underwriters' compensation will be 6% of the issue price. The firm will also incur expenses in the amount of $110.000 How many shares must the firm sell to net 540 million after underwriting and flotation expenses? 14-3 Assume a company just sold 15,000,000 shares in an IPO for $12 per share. If the underwriter IPO Pricing took a 5% fee, and the company incurred $450,000 in legal and consulting costs: a. What net proceeds did the company and underwriters receive? b. How much money will be left on the table if at the end of the first day the stock closed at $157 at $11? Who benefits in each case? 14-4 J. Bourne Security Products (BSP) is a successful company, but it needs $200,000 in addi- New Blockletional funding to grow. JBSP and an angel investor agree the business is worth 500,000 and the angel has agreed to invest the $200,000 that is needed. There are currently 40,000 shares outstanding. What is a fair price per share and how many additional shares must JSP sell to the angel Because the stock will be sold directly to an investor, there is no sprend; assume other flotation costs are insignificant Intermediate Problems 5-9 145 Ele's Concrete Co. (ECC) currently has sales of $30 million and a net pront margin of 3% Dilution Management is contemplating expansion, which would lead to sales growth of a but would also require raising 54 million through an equity issue. ECC shares currently trade 14.75, and its underwriter believes that the market would be receptive to the trening at sis. The underwriter will charge 5.5%. If ECC currently has 3 million shares outstanding calculate Els before share issuance and after assume that sales mansion s altet share 14-2 Tundra Engineering, whose stock price is now $32, needs to raise $40 million in common Underwriting and stock. Underwriters have informed the firm's management that they must price the new issue Flotation Expenses to the public at 531 per share because of signalling effects. The underwriters' compensation will be 6% of the issue price. The firm will also incur expenses in the amount of 5110,000 How many shares must the firm sell to net $40 million after underwriting and flotation expenses? 14-3 Assume a company just sold 15,000,000 shares in an IPO for $12 per share. If the underwriter IPO Pricing took a 5% fee, and the company incurred $450,000 in legal and consulting costs: a. What net proceeds did the company and underwriters receive? b. How much money will be left on the table if at the end of the first day the stock closed at $157 at $11? Who benefits in each case? 14-4 J. Bourne Security Products (BSP) is a successful company, but it needs $200,000 in addi- New So t ional funding to grow. JUSP and an angel investor agree the business is worth $800,000 and the angel has agreed to invest the $200,000 that is needed. There are currently 40,000 shares outstanding. What is a fair price per share and how many additional shares must JBSP sell to the angel Because the stock will be sold directly to an investor, there is no spread; assume Intermediate other flotation costs are insignificant. Pohlam 19