DiPitros Paint and Wallpaper, Inc., needs to raise $2.870 million to finance pla

Question

DiPitros Paint and Wallpaper, Inc., needs to raise $2.870 million to finance plant expansion. In discussions with its investment bank, DiPitros learns that the bankers recommend a gross price of $44 per share and that 70,000 shares of stock be sold. The net proceeds on the stock sale leaves DiPitros with $2.870 million.

Calculate the underwriters spread in dollars per share on the stock issue. (Round your answer to 3 decimal places.)

Calculate the underwriters spread in percentage on the stock issue. (Round your answer to 2 decimal places.)

DiPitros Paint and Wallpaper, Inc., needs to raise $2.870 million to finance plant expansion. In discussions with its investment bank, DiPitros learns that the bankers recommend a gross price of $44 per share and that 70,000 shares of stock be sold. The net proceeds on the stock sale leaves DiPitros with $2.870 million.

Explanation / Answer

to get stock proceeds of $2.870 million

with 70000 shares price to be received by company is (2870000/70000) = $41

but share is offered at $44

therefore spred per share = $3

or 7.317%

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