3. BB Bank intends to issue 2 million shares of common stock. The bank's investment dealer has offeredtwo alternatives:Plan A: A best efforts offering at $16 per share to an underwriting commission of 2% of the expectedproceeds plus $300,000. The Investment dealer firm expects 93% of the issue will be sold.Plan B: An underwritten offer at $15.50 per share plus an underwriting fee of 7% of the gross proceedsQuestionsa. What is the expected gross proceeds from each plan?b. Which plan offers the highest net proceeds to BB Bank?

It is the amount received from the issue of shares after deducting the cost of issuing the shares.…

Answered: 3. BB Bank intends to issue 2 million…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Management plans a $120 million IPO in which the offering price to the public will be $50 per share. The company will receive $47.50 per share. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs will total $400,000. If the stock price increases 14 percent on the first day of trading, what will be the total cost of issuing the securities? Total cost $________
Ans
The IPO Investment Bank has the following financing outstanding. Debt: 20,000 bonds with a coupon rate of 12 percent and a current price quote of 110; the bonds have 20 years to maturity. 190, 000 zero coupon bonds with a price quote of 20.5 and 30 years until maturity. Both bonds have a par value of $1,000 and semiannual coupons. Preferred stock: 110,000 shares of 10 percent preferred stock with a current price of $85, and a par value of $100. Common stock: 2,200, 000 shares of common stock; the current price is $71, and the beta of the stock is 1.45. Market: The corporate tax rate is 21 percent, the market risk premium is 5 percent, and the risk - free rate is 2 percent. What is the WACC for the company? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Disturbed Corp. needs to raise $53.5 million to fund a new project. The company will sell shares at a price of $23.00 in a general cash offer and the company's underwriters will charge a spread of 6 percent. The direct flotation costs associated with the issue are $550,000 and the indirect costs are $375,000. How many shares need to be sold? Multiple Choice 2,216,981 shares 2,209,803 shares 2,326,087 shares 2,517,345 shares 2,421716 shares
Jenny Corporation needs to raise $46 million to fund a new project. The company will sell shares at a price of $27.60 in a general cash offer and the company's underwriters will charge a spread of 6.5 percent. The direct flotation costs associated with the issue are $575,000. How many shares need to be sold? Multiple Choice 1,666,667 shares 1,804,813 shares 1,735,740 shares 1,564,945 shares 1,615,806 shares
River Cruises is all-equity-financed with 100,000 shares. It now proposes to issue $300,000 of debt at an interest rate of 12% and use the proceeds to repurchase 30,000 shares at $10 per share. Profits before interest are expected to be $130,000. What is the ratio of price to expected earnings for River Cruises before it borrows the $300,000? What is the ratio after it borrow?
Hi, I need help solving for Req 1, and cells A and B of Req 2. Thank you.
A firm is making an initial public offering. The investment bankers agree to a firm-commitment underwriting for 480,000 shares that would be priced to the public at $33 per share. The underwriter’s spread is 6 percent. What will be the proceeds for the issuer and the underwriter?

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