Question

ABC Ltd., a technology company, issues a $40 million IPO providing proceeds to ABC of $4.5...

ABC Ltd., a technology company, issues a $40 million IPO providing proceeds to ABC of $4.5 per share, from an offer price to the public of $5 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $361,000. The company's share price increases 20 per cent on the first day. What is the total cost to the issuer of the IPO (in millions of dollars to the nearest three decimal places; don’t use the $ sign eg 7.897)?

0 0
Add a comment Improve this question Transcribed image text
Answer #1

total cost to the issuer of the IPO = value of discount given on offer price + legal & registration fees and other administrative costs

first we calculate no. of shares issued by the company.

no. of shares issued = IPO value/offer price per share = $40 million/$5 = 8 million shares

value of discount given on offer price = no. of shares issued*discount per share = 8 million*($5 - $4.5) = 8 million*$0.50 = $4 million

total cost to the issuer of the IPO = $4 million + $0.361 million = $4.361 million

Add a comment
Know the answer?
Add Answer to:
ABC Ltd., a technology company, issues a $40 million IPO providing proceeds to ABC of $4.5...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • ABC Ltd issues a $25 million IPO providing proceeds to ABC of $4.5 per share, from...

    ABC Ltd issues a $25 million IPO providing proceeds to ABC of $4.5 per share, from an offer price to the public of $5 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $387,000. The company's share price increases 14 per cent on the first day. What is the underpricing cost to the company of issuing the securities? (in millions of dollars to the nearest three decimal places; don’t use the $ sign eg 7.897)?

  • ABC Ltd issues a $20 million IPO providing proceeds to ABC of $4.5 per share, from...

    ABC Ltd issues a $20 million IPO providing proceeds to ABC of $4.5 per share, from an offer price to the public of $5 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $314,000. The company's share price increases 8 per cent on the first day. What is the underpricing cost to the company of issuing the securities? (in millions of dollars to the nearest three decimal places; don’t use the $ sign eg 7.897)?

  • ABC Ltd issues a $18 million IPO providing proceeds to ABC of $2.7 per share, from...

    ABC Ltd issues a $18 million IPO providing proceeds to ABC of $2.7 per share, from an offer price to the public of $3 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $441,000. The company's share price increases 14 per cent on the first day. What is the underwriting cost? (in millions of dollars to the nearest three decimal places; don't use the $ sign eg 7.897) When ABC Company went public in September...

  • ABC Ltd, a high-technology company, issues a $33 million IPO with an offer price of $4...

    ABC Ltd, a high-technology company, issues a $33 million IPO with an offer price of $4 per share, underwritten at $3.76 per share. The company's legal fees, ASIC registration fees, and other administrative costs are $430,000. The company's share price increases by $0.6 on the first day. What is the company's total cost of issuing the securities (in millions of dollars to three decimal places; don’t use $ sign eg $4.5766 million is 4.577)? (Remember to round the number of...

  • A company is planning a new plant and needs to raise (net of underwriting cost) $14.25...

    A company is planning a new plant and needs to raise (net of underwriting cost) $14.25 million to finance it. The company plans to raise the money through a general cash offering priced at an offer price of $5 a share. The underwriters charge a 5 per cent spread. How many shares does the company have to sell to achieve its goal (in millions to three decimal places)? (Hint: required amount/(1-spread) = issue amount) Select one: a. 3.000 b. 15.789...

  • BBB Ltd issues an IPO. The company's investment bank demands a spread of 6 per cent of the offer price, which is set at...

    BBB Ltd issues an IPO. The company's investment bank demands a spread of 6 per cent of the offer price, which is set at $3 per share. 4 million shares are issued. What are the proceeds for the issuer (in millions of dollars to the nearest three decimal places; don’t show $ sign or commas eg 18.404)?

  • In a Canadian IPO issues, the issuing company has incurred $8 million for the flotation costs...

    In a Canadian IPO issues, the issuing company has incurred $8 million for the flotation costs and legal fees. The issue involves 45 million shares. As a firm commitment written deal, the underwriter agrees to buy the shares at $19 each and resells to the public at $20.50 per share. What will be the percentage of direct costs required in this deal? a. 11.5% b. 10.6% c. 9.1% D. 8.4% PLEASE SHOW ALL OF YOUR CALCULATIONS. THANKS!!!

  • When ABC Company went public in September 2008, the offer price was $4.42 per share and the closing price at the end of...

    When ABC Company went public in September 2008, the offer price was $4.42 per share and the closing price at the end of the first day was $6.92. The company issued 5 million shares. What was the loss to the company due to under-pricing? (in millions of dollars to the nearest two decimal places; don’t use $ sign eg $4.5766 million is 4.58)

  • Question 3 (10 marks) Atlas Pty Ltd needs $50 million for its next growth phase. It...

    Question 3 (10 marks) Atlas Pty Ltd needs $50 million for its next growth phase. It plans to raise the money by an Initial Public Offering (IPO) of shares and has provided the following information to the market The first dividend of $2.50 will be paid next vear . After that dividend, dividends are expected to grow annually by 4% per annum, in perpetuity The underwriters will charge a 7 per cent spread. Assume shareholders require a return of 16%...

  • 6. The market for common stock Aa Aa Type of offering When a company issues stock...

    6. The market for common stock Aa Aa Type of offering When a company issues stock or shares to the public for the first time, it is referred to as ary an initial public offering Initial Public Offering performance When the demand for an initial public offering (IPO) of securities exceeds the number of securities issued, the offering is deemed to be O Oversubscribed O Undersubscribed Indigo Inc. is going public and issuing 15D, ODD shares of common stock. The...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT