1) The Peter Corporation and the Sellers Company have both announced IPOs. You place
anorder for 1,200 shares of each IPO. One of the IPOs is underpriced by $15.25 and the other is
overpriced by $8.00. If you could get all of the shares you ordered for each IPO, what would
your profit be?
1)
A) $18,300.00
B) $27,900.00
C) $7,975.00
D) $7,250.00
E) $8,700.00
Question Details
Difficulty : 1 Basic
Topic : Initial public offerings
Learning Objective : 15-03 Define initial public offerings and some of the costs of going public.
AACSB : Analytical Thinking
Bloom's : Understand
Section : 15.5 IPOs and Underpricing
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
2) The Bert Corporation and Ernie, Incorporated, have both announced IPOs. You place
anorder for 750 shares of each IPO. One of the IPOs is underpriced by $16.00 and the other is
overpriced by $6.75. You will receive all of the shares you ordered of the overpriced IPO, but
only one-half of the shares you ordered of the underpriced IPO. What profit do you expect?
2)
A) $6,937.50
B) $937.50
C) $5,781.25
D) $17,062.50
E) $6,000.00
,Question Details
Difficulty : 1 Basic
Topic : Initial public offerings
Learning Objective : 15-03 Define initial public offerings and some of the costs of going public.
AACSB : Analytical Thinking
Bloom's : Understand
Section : 15.5 IPOs and Underpricing
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
3) Gravity Company needs to raise $47.5 million to fund its expansion plans. The company
will sell shares at a price of $27.90 in a general cash offer and the company's underwriters will
charge a spread of 6 percent. How many shares need to be sold?
3)
A) 2,012,422 shares
B) 1,606,141 shares
C) 1,702,509 shares
D) 1,811,180 shares
E) 1,376,692 shares
Question Details
Difficulty : 1 Basic
Learning Objective : 15-03 Define initial public offerings and some of the costs of going public.
AACSB : Analytical Thinking
Bloom's : Understand
Topic : Costs of issuing securities
Section : 15.7 The Costs of Issuing Securities
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
4) Jenny Corporation needs to raise $53 million to fund a new project. The company will
sell shares at a price of $29.00 in a general cash offer and the company's underwriters will charge
a spread of 7.5 percent. The direct flotation costs associated with the issue are $925,000. How
many shares need to be sold?
4)
, A) 1,763,833 shares
B) 1,700,080 shares
C) 2,010,252 shares
D) 1,827,586 shares
E) 1,918,919 shares
Question Details
Difficulty : 1 Basic
Learning Objective : 15-03 Define initial public offerings and some of the costs of going public.
AACSB : Analytical Thinking
Bloom's : Understand
Topic : Costs of issuing securities
Section : 15.7 The Costs of Issuing Securities
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
5) Disturbed Corporation needs to raise $57 million to fund a new project. The company
will sell shares at a price of $23.70 in a general cash offer and the company's underwriters will
charge a spread of 7.5 percent. The direct flotation costs associated with the issue are $725,000
and the indirect costs are $445,000. How many shares need to be sold?
5)
A) 2,529,251 shares
B) 2,254,735 shares
C) 2,405,063 shares
D) 2,265,725 shares
E) 2,653,438 shares
Question Details
Difficulty : 1 Basic
Learning Objective : 15-03 Define initial public offerings and some of the costs of going public.
AACSB : Analytical Thinking
Bloom's : Understand
Topic : Costs of issuing securities
Section : 15.7 The Costs of Issuing Securities
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
, 6) Under a firm commitment agreement, Zeke Companywent public and received $34.75 for
each of the 8.7 million shares sold. The initial offer price was $37 and the stock rose to $40.88.
The company paid $560,000 in direct flotation costs and $215,000 in indirect costs. What was
the flotation cost as a percentage of funds raised?
6)
A) 6.68%
B) 27.92%
C) 26.47%
D) 17.94%
E) 22.89%
Question Details
Learning Objective : 15-03 Define initial public offerings and some of the costs of going public.
AACSB : Analytical Thinking
Topic : Costs of issuing securities
Section : 15.7 The Costs of Issuing Securities
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Difficulty : 3 Hard
Bloom's : Analyze
7) Northern Air would like to sell 2,100 shares of stock using Dutch auction underwriting.
The bids received are:
Bidder Quantity Price
A 250 $ 28.80
B 350 28.45
C 750 28.30
D 950 27.95
E 1,150 27.75
How much will the company raise in its offer?Ignore all flotation and transaction costs.
7)