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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 Preview


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

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

    Solution Summary

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