Your investment bankers price your IPO at $14. 95 per share for 9. 1 million sha
ID: 2774373 • Letter: Y
Question
Your investment bankers price your IPO at $14. 95 per share for 9. 1 million shares. If the price at the end of the first day of trading is $16. 75 per share, what was the percentage underpricing? how much money did the firm miss out on due to underpricing? what was the percentage underpricing? As a percent of the offering price, the underpricing is %. (Round to one decimal place.) how much money did the firm miss out on due to underpricing? The forgone money will be $ million. (Round to one decimal place.)Explanation / Answer
Underpricing amount per share = Traded price - Offered Price
= $16.75 - $14.95 = $1.80 per share
a. Percentage underpricing = Underpricing amount / Offered price
= $1.80 / $14.95 = 0.1204 = 12%
b. Forgone Money = Underpricing amount per share * No. of shares
= $1.80 * 9.1 million = $16.4 million
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