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Yesterday, 18:53

How much will a firm receive in net funding from a firm commitment underwriting of 250,000 shares priced to the public at $40 if a 10% underwriting spread has been added to the price paid by the underwriter? Additionally, the firm pays $600,000 in legal fees.

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  1. Yesterday, 21:45
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    The firm receive in net funding = $8,490,000

    Explanation:

    The Share's Offer to the public = $40 per Share

    The Final Cost to the Firm or Issuer = $40 * 110 / 100

    The Final Cost to the Firm or Issuer = $40 * 1.10

    The Final Cost to the Firm or Issuer = $36.36 Per Share

    The firm commitment underwriting of Shares = 250,000

    The Amount of Share's issued by the firm = 250,000 * 36.36

    The Amount of Share's issued by the firm = $9,090,000

    The firm receive in net funding = Amount of Share - Legal Fees

    The firm receive in net funding = $9,090,000 - $600,000

    The firm receive in net funding = $8,490,000
  2. Yesterday, 21:52
    0
    The firm will recieve $8,490,000 in net funding.

    Explanation:

    The cost per share to public is $40.00 per share

    The Net Cost to the issuer [$40 per share / 1.10], so the amount is $36.36 per share

    We then know that the Number of shares issued is 250,000 Shares so,

    Total amount of shares issued [250,000 Shares x $36.36 per share] = $9,090,000

    The firm pays $600,000 in legal fees, so $9,090,000 - $600,000 would be = $8,490,000 which would be the amount that the firm will receive.
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