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IPO offering: how many shares, estimated stock price

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A firm is planning an IPO. The underwriters say stock will sell at $20. The direct costs will be $800,000 and underwriters will charge a 7% spread.

(a) How many shares must be sold to net $30 million.
(b) If the stock price closes on day one at $22. per share how much will the firm have left on the table?
(c) What are the firms total costs for the IPO?

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Solution Summary

The solution computes estimated stock price, total costs of IPO, no. of shares in different scenario of IPO Offering.

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A

Net proceed = 20 * No. of shares - 800000 - 7%*20* No. of shares

That is 30,000,000 = 20 * S - 800,000 - ...

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