Perfect Solutions Inc. is planning an initial public offering (IPO). The deal wi

Question

Perfect Solutions Inc. is planning an initial public offering (IPO). The deal will be underwritten with opening stock price setat$25 per share. The investment bank will charge a 3% spread. Direct costs will be $225,000.

Spread= charge by investment bank for their services. It is the difference between price paid to issuing company and price at which shares are sold to the public.  

The first day of tradingcan produce significant stock price fluctuations.  In Canada most first-day returns fall between 3.6% to 11.6%.  See page 434 for someexamples of First-Day IPO Returns.

e.   Find an example of a Canadian or American company that had their IPO sometime during the last 2 years.    Provide a short overview of the company including the name oftheir CEO, as well as a discussion about theexpectations prior to the IPO, the results of the first-day and their current share price.

Youranswer should be 1-2 paragraphsin length and usea minimum of  two sources that are cited at the bottom of your answer in APA format.

answers will varyd. What are the typical steps involved in issuing an Initial Public Offering (IPO)?

a. How many shares must the firm sell to net $15 million? Place your final answer here: Offer Price $25 Direct costs $225,000 Spread 3% Net Amt $15,000,000 Proceeds per share = (1 - spread)(share price) = Required proceeds after direct costs # Shares = Req'd Proceeds / Proceeds per share b. If the stock price closes the first day at $27, how much cash has the firm left on the table? Place your final answer here: Closing price = $27 Amount left on table = (Closing price - offer price)(Number of shares) Amount left on table = c. What are the firm's total costs (direct, indirect and underwriting) for the IPO? Place your final answer here: Underwriting cost = (spread)(Offer Price)(# Shares) Underwriting cost = Indirect costs = amt left on table = Total Costs = (Direct costs) + Underwriting cost + Amount left on table Total Costs = http://www.macewan.ca/wcm/StudentServices/WritingandLearningServices/CitingDocumentingInformation/APADocumentation/index.htm

e.   Find an example of a Canadian or American company that had their IPO sometime during the last 2 years.    Provide a short overview of the company including the name oftheir CEO, as well as a discussion about theexpectations prior to the IPO, the results of the first-day and their current share price.

Youranswer should be 1-2 paragraphsin length and usea minimum of  two sources that are cited at the bottom of your answer in APA format.

answers will varyd. What are the typical steps involved in issuing an Initial Public Offering (IPO)?

Explanation / Answer

(a) Offer Price = $ 25, Spread = 3 %, Proceeds per Share = 25 x (1-0.03) = $ 24.25

Required proceeds after direct cost = 15000000 + 225000 = $ 15225000

Number of Shares = 15225000 / 24.25 = 627835.0515 or 627835 approximately.

(b) Closing Price = $ 27

Amount left on the table = (27-25) x 627835 = $ 1255670

(c) Underwriting Cost = 0.03 x 25 x 627835 = $ 470876.25

Indirect Cost = Amount Left on the Table = $ 1255670

Direct Cost = $ 225000

Total Cost = Direct Cost + Indirect Cost + Underwriting Cost = 225000 + 1255670 + 470876.25 = $ 1951546.25

NOTE: Please raise a separate query for the solution to the unrelated last sub-part.

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