A company wants to raise $400 million in a new stock issue. Its investment banker indicates that the sale of new stock will percent underpricing and a 4 percent spread (Hint: the underpricing is 5 percent of the current stock price, and the spread of the issue price) a Assuming the company's stock price does not change from its current price of $65 per share, what would be the issue p public after underpricing? How many shares would the company need to sell? Note: Round intermediate calculations to 2 decimal places. Round your answers to 2 decimal places. Enter "Number answer in millions. 4 Issue price Number of shares million b. How much money will the investment banking syndicate earn on the sale? Note: Round intermediate calculations to 2 decimal places. Enter your answer in millions rounded to 2 decimal places. Investment bankers' revenue million

A company wants to raise $400 million in a new stock issue. Its investment banker indicates that the sale of new stock will percent underpricing and a 4 percent spread (Hint: the underpricing is 5 percent of the current stock price, and the spread of the issue price) a Assuming the company's stock price does not change from its current price of $65 per share, what would be the issue p public after underpricing? How many shares would the company need to sell? Note: Round intermediate calculations to 2 decimal places. Round your answers to 2 decimal places. Enter "Number answer in millions. 4 Issue price Number of shares million b. How much money will the investment banking syndicate earn on the sale? Note: Round intermediate calculations to 2 decimal places. Enter your answer in millions rounded to 2 decimal places. Investment bankers' revenue million

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter15: Distributions To Shareholders: Dividends And Repurchases

Section: Chapter Questions

Problem 6MC: Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid...

See similar textbooks

Similar questions

Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?
Solution is incorrect. Can you try again with this: Assume Evco, Inc. has a current stock price of $54.38 and will pay a $2.05 dividend in one year; its equity cost of capital is 11%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?
The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (D₁) at the end of the current year will be $1.40. The growth rate (g) is 10 percent and the discount rate () is 14 percent. a. What should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.) Price of the stock b. If there is a 5 percent total underwriting spread on the stock, how much will the issuing corporation receive? (Do not round intermediate calculations and round your answer to 2 decimal places.) Net price to the corporation c. If the issuing corporation requires a net price of $33.50 (proceeds to the corporation) and there is a 5 percent underwriting spread, what should be the price of the stock to the public? (Do not round intermediate calculations and round your answer to 2 decimal places.) Necessary public price
Assume Evco, Inc. has a current stock price of $50.92 and will pay a $2.20 dividend in one year; its equity cost of capital is 18%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? We can expect Evco stock to sell for $_____. (Round to the nearest cent.)
The Dunn Corporation is planning to pay dividends of $540000. There are 270000 shares outstanding, and earnings per share are $4. The stock should sell for $48 after the ex-dividend date. If, instead of paying a dividend, the firm decides to repurchase stock,a. What should be the repurchase price? b. How many shares should be repurchased? c. What if the repurchase price is set below or above your suggested price in part a? d. If you own 100 shares, would you prefer that the company pay the dividend or repurchase stock? a. 3/10, net 45 b. 3/15 net 30 c. 3/15 net 60 d.2/10 net 45
The investment banking firm of Einstein & Co. will use a dividend valuation model to appraise the shares of the Modern Physics Corporation. Dividends (D1) at the end of the current year will be $1.64. The growth rate (g) is 8 percent and the discount rate (Ke) is 13 percent. What should be the price of the stock to the public? If there is a 7 percent total underwriting spread on the stock, how much will the issuing corporation receive? If the issuing corporation requires a net price of $31.30 (proceeds to the corporation) and there is a 7 percent underwriting spread, what should be the price of the stock to the public? (Round to two places to the right of the decimal point.)
12)Under dollar-cost averaging (cedi cost averaging), an investor will purchase GHS6,000 worth of stock each year for three years. The stock price is GHS40 in year 1, GHS30 in year 2, and GHS48 in year 3. i)Compute the average price per share. ii) Compute the average cost per share. Explain why the average cost is less than the average price
A preferred stock from Duquesne Light Company (DQU-PRA) pays $2.10 in annual dividends. If the required rate of return on the preferred stock is 5.4 percent, what is the fair present value of the stock? Please show the solution/ formula used for me so i'll be able to understand it clearly. Thank you
A company is also selling 15% preferred stock issue at Rs.100 par value and at a current price of Rs.75 a share, there would be need to calculate cost of this stock to decide whether company should issue new stocks in future or not. Q) What would be the cost of preferred stock?
Assume Evco, Inc., has a current stock price of $39 and will pay a $1.80 dividend in one year; its equity cost of capital is 13%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price? The expected price is $_______. (Round to the nearest cent.)
Assume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.67 P0 = $27.50; g = 8.00% (constant). Float on new issues is 5% of market price. What is the cost of issuing common stock?
A stock will pay a $1 dividend next year, a $2 dividend the year following, and a $3 dividend in year 3, at which time it will be acquired for $12 per share. If investors require a 12% return, what is the current value of the stock? (Round to the nearest cent and do not enter a dollar sign)