Page 16-77 question c.

Case 16-1 Steps to Success Janet Richards xes her eyes on those ofher partner Gilbert Baker and says firmly. \"Alright. Let: 5 do it." And with those words, InterCat, a firm founded by Janet and Gilbert that specializes in the design and maintenance of Internet catalogues for small consumer businesses, will be going public. lnterCat employs 30 individuals. with the majority of them computer programmers. Many of the employees have followed the high-technologr market very closely and have decided that since hi ghtechnology firms are more understood and valued in the United States than in other countries. lnterCat should issue its stock only in the United States. Five million shares of InterCat stock will comprise this new issue. The task the company has ahead of itself is certainly daunting. Janet and Gilbert lcnow that many steps have to be completed in the process of making an initial public offering. They also know that they need to complete the process within 28 weeks because they need the new capital fairly soon to ensure that huerCat has the resources to capture valuable new business om its competitors and continue growing. They also value a speedy initial public offering because they believe that the window of opportunity for obtaining a good stock price is presently wide open the public is wild about shopping on the Internet, and few companies offering Web page design services for Internet catalogues have gone public. Because the 28week deadline is breathing down their necks, Janet and Gilbert decide to map the steps in the process of making an initial public offering. They list each major activity that needs to be completed, the activities that directly precede each activity, the time needed to complete each activity, and the cost of each activity. This list is shown below. c. Janet and Gilbert hear through the grapevine that their most fierce competitor, Soft Sales, is also planning to go public. They fear that if InterCat does not complete its initial public offering before Soft Sales, the price investors are willing to pay for InterCat stock will drop since investors will perceive Soft Sales to be a stronger, more organized company. Janet and Gilbert therefore decide that they want to complete the process of issuing new stock within 22 weeks. They think such a goal is possible if they throw more resources-workers and money-into some activities. They list the activities that can be shortened, the time the activity will take when it is fully shortened, and the cost of shortening the activity this much. They also conclude that partially shortening each activity listed below is possible and will give a time reduction and cost proportional to the amounts when fully shortened. Activity Time (Weeks) Cost Evaluate the prestige of each potential underwriter. 1.5 $14,000 Select a syndicate of underwriters. 0.5 8,000 Prepare the registration statement, including the 4 95,000 proposed financing and information about the firm's history, existing business, and plans for the future. Make presentations to institutional investors and 4 60,000 develop the interest of potential buyers. Distribute the preliminary prospectus, affectionately 2 22,000 termed the red herring. Calculate the issue price. 3.5 31,000 Amend the registration statement and resubmit it 0.5 9,000 to the SEC. Confirm that the new issue complies with the 0.5 8,300 "blue sky" laws of each state. Appoint a registrar. 1.5 19,000 Appoint a transfer agent. 1.5 21,000 Issue final prospectus that includes the final offer 2 99,000 price and any amendments to all purchasers offered securities through the mail. Phone interested buyers. 1.5 20,000 How can InterCat meet the new deadline set by Janet and Gilbert at minimum cost