Harper’s Dog Pens, Inc., with the help of its investment bank, recently issued 8

Question

Harper’s Dog Pens, Inc., with the help of its investment bank, recently issued 8.3 million shares of new stock. The offer price on the stock was $11.50 per share and Harper’s received a total of $88.81 million from the stock offering.

Calculate the net proceeds per share and the underwriter's spread per share on the stock offering. (Round your answers to 2 decimal places.)

What percentage of the gross proceeds is the investment bank charging Harper’s Dog Pens for underwriting the stock issue? (Round your answer to 2 decimal places.)

Harper’s Dog Pens, Inc., with the help of its investment bank, recently issued 8.3 million shares of new stock. The offer price on the stock was $11.50 per share and Harper’s received a total of $88.81 million from the stock offering.

Explanation / Answer

Answer:

Net Proceeds per Share = Proceeds received / No. of Shares issued
Net Proceeds per Share = 88,810,000 / 8,300,000
Net Proceeds per Share = $10.70

Underwriter’s Spread = Underwriter’s fund / No. of Shares issued
Underwriter’s Fund = Gross Fund received – Proceeds received
Gross Funds received = $11.50 * 8,300,000
Gross Funds received = $95,450,000

Underwriter’s Fund = $94,450,000 - $88,810,000
Underwriter’s Fund = $6,640,000

Underwriter’s Spread = 6,640,000 / 8,300,000
Underwriter’s Spread = $0.80 per Share

Investment Bank’s percentage of Gross = 0.80 / 11.50 * 100
Investment Bank’s percentage of Gross = 6.96%

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