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Case investment banking and the public sale of equity

Mini case:
Pc Unlimited wishes to go public by issuing 20 million shares of common stock at an offer price 14.63 each. Skrail underwriters will charge 6.5 % underwriting fees.

1. How much will PC Unlimited raise in cash, assuming that all the shares sell?
2- If PC Unlimited wishes to raise $250 million in cash, what proportion of its initial offering must be sold?
3- Assume purchased shares at the IPO price and then sold after one year for 3.42 each. What is your after tax return if you are in the 15% bracket for capital gains?

Solution Preview

1. Total Cash:

Total receipt from sale: 20 million* 14.63= 292600000

Less: Underwriting commission= 6.5% of 19019000

Net receipts for PC: 273581000 or 273.58 million approximately.

2. To Raise 250 million cash, we need to raise:

X- ...

Solution Summary

Discusses mini case related to sale of equity.

$2.19