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quantity discount

Assume Fisher Food Products is thinking about 3 different size offerings for the issuance of additional shares

Size offer Public Price Net to Corporation
a. 1.6 million $40 $36.70
b. 6.0 million 40 37.28
c. 25.0 million 40 38.12

What is the percentage underwriting spread for each size offer?
and
What principle does this demonstrate?

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Solution Preview

a) Spread = $40 - $36.70 = $3.30
Percentage underwriting spread = 3.30/40=8.25%

b) Spread = ...

Solution Summary

A comparison to quantity discount is made.

$2.19