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Problem 15-14: Underwriting Costs (Wilson Sporting Goods)

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Problem 15-14: Underwriting Costs (Wilson Sporting Goods)

Wilson Sporting Goods is considering a public offering of common stock. Its investment banker has informed the company that the retail price will be $18 per share for 600,000 shares. The company will receive $16.50 per share and will incur $150,000 in registration, accounting, and printing fees.

a. What is the spread on this issue in percentage terms? What are the total expenses of the issue as a percentage of total value (at retail)?

b. If the firm wanted to net $18 million from this issue, how many shares must be sold?

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Solution Summary

A formatted MS Excel spreadsheet is attached, containing detailed, step-by-step instructions for the calculation of the underwriting costs for the Wilson Sporting Goods Problem (15-14).

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