25 May Question
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<pclass=”msonormal” style=”box-sizing: border-box; margin: 15.95pt 0cm; break-after: avoid;”>51. Calculating Costs of Issuing Stock Computer Technology Corp. recently went public with an initial public offering of 7 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds was $8.35 per share and the underwriter’s spread was 7 percent of the gross proceeds. Computer also paid legal and other administrative costs of $300,000 for the IPO. Calculate the gross proceeds per share received by Computer from the sale of the 7 million shares of stock.
A. $8.35
B. $8.39
C. $8.98
D. $9.02
- Calculating Costs of Issuing StockTV Technology Corp. recently went public with an initial public offering of 1.5 million shares of stock. The underwriter used a firm commitment offering in which the net proceeds was $24.50 per share and the underwriter’s spread was 5 percent of the gross proceeds. TV also paid legal and other administrative costs of $300,000 for the IPO. Calculate the gross proceeds per share received by TV from the sale of the 3 million shares of stock.
A. $24.50
B. $24.70
C. $25.79
D. $26.00 - Calculating Costs of Issuing StockMick E Inc. plans to issue 25 million new shares of its stock. In discussions with its investment bank, Mick E learns that the bankers recommend a net proceed of $29.80 per share and they will charge an underwriter’s spread of 8.5 percent of the gross proceeds. In addition, Mick E must pay $3 million in legal and other administrative expenses for the seasoned stock offering. Calculate the gross proceeds per share received by Mick E from the sale of the 25 million shares of stock.
A. $29.80
B. $32.45
C. $32.57
D. $32.70 - Calculating Fees on a Loan CommitmentDuring the last year you have had a loan commitment from your bank to fund inventory purchases for your small business. The total line available was $500,000, of which you took down $400,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $400,000) of $1,750 on this loan commitment. You remember that the up-front fee was 25 basis points. What is the back-end fee on this loan commitment?
A. 5 basis points
B. 50 basis points
C. 10 basis points
D. 20 basis points
- Calculating Fees on a Loan CommitmentDuring the last year you have had a loan commitment from your bank to fund inventory purchases for your small business. The total line available was $500,000, of which you took down $300,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $300,000) of $5,000 on this loan commitment. You remember that the up-front fee was 75 basis points. What is the back-end fee on this loan commitment?
A. 6 basis points
B. 62.5 basis points
C. 75 basis points
D. 2.5 basis points - Calculating Fees on a Loan CommitmentDuring the last year you have had a loan commitment from your bank to fund working capital for your business. The total line available was $2,500,000, of which you took down $1,000,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $1,000,000) of $15,000 on this loan commitment. You remember that the back-end fee was 30 basis points. Calculate the front-end fee on this loan commitment.
A. 30 basis points
B. 42 basis points
C. 60 basis points
D. 70 basis points - Calculating Fees on a Loan CommitmentDuring the last year you have had a loan commitment from your bank to fund working capital for your business. The total line available was $25,000,000, of which you took down $20,000,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $20,000,000) of $110,000 on this loan commitment. You remember that the back-end fee was 60 basis points. Calculate the front-end fee on this loan commitment.
A. 60 basis points
B. 32 basis points
C. 40 basis points
D. 16 basis points
- Calculating Costs of Issuing StockYour company needs to raise $4 million to finance plant expansion. In discussions with its investment bank, you learn that the bankers recommend a gross price of $50 per share and that 90,000 shares of stock be sold. If the net proceeds on the stock sale leaves your company with $4 million, what is the underwriter’s spread on the stock issue?
A. $2.78
B. $5.55
C. $44.44
D. $38.89 - Calculating Costs of Issuing StockYour company needs to raise $10 million to finance plant expansion. In discussions with its investment bank, you learn that the bankers recommend a gross price of $45 per share and that 240,000 shares of stock be sold. If the net proceeds on the stock sale leave your company with $10 million, what is the underwriter’s spread on the stock issue?
A. $3.33
B. $6.66
C. $45.00
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