XYZ, Inc., has issued 13 million new shares of stock. An investment bank agrees
ID: 2798490 • Letter: X
Question
XYZ, Inc., has issued 13 million new shares of stock. An investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 10.3 million shares for $29 per share, and it charges XYZ $0.770 per share sold.
How much money does XYZ receive after commission? (Enter your answer in dollars not in millions. Do not round intermediate calculations.)
What is the profit to the investment bank? (Enter your answer in dollars not in millions. Do not round intermediate calculations.)
What is the stock price of XYZ?
XYZ, Inc., has issued 13 million new shares of stock. An investment bank agrees to underwrite these shares on a best efforts basis. The investment bank is able to sell 10.3 million shares for $29 per share, and it charges XYZ $0.770 per share sold.
Explanation / Answer
Amount which XYZ receives = 10.3mill * 29 = $298,700,000,
Amount which the investment bank’s receives as fees (profit) = 10.3 mill * 0.77 = $7,931,000
The net proceeds after commission to XYZ is = amount received by XYZ - fee for investment bank = $ 290,769,000
The stock price is $29 per share since that is what the public pays.
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