Assume that a stock-issuing firm has a choice between a private placement selling the shares for $47.50 per share or a best efforts offering that will sell all available shares at the prices described in the following probability distribution: Best efforts expected probability distribution Probability Selling price 30% 45% 25% Lowest quoted price Mid-range price Highest quoted price Assuming that the issue is fully subscribed, or sold, which method would generate the most capital for the issuing firm? Private placement $44.00 $46.00 $49.00 Best efforts sale A relatively new IPO selling method has developed: the unsyndicated stock offering. Under this arrangement, the issue is sold to institutional investors by an underwriting syndicate. 100% of the issue is sold to institutional investors by a single underwriter. the entire issue is sold to both individual and institutional investors by an underwriting syndicate. 100% of the issue is sold to individual investors by a single underwriter.
Assume that a stock-issuing firm has a choice between a private placement selling the shares for $47.50 per share or a best efforts offering that will sell all available shares at the prices described in the following probability distribution: Best efforts expected probability distribution Probability Selling price 30% 45% 25% Lowest quoted price Mid-range price Highest quoted price Assuming that the issue is fully subscribed, or sold, which method would generate the most capital for the issuing firm? Private placement $44.00 $46.00 $49.00 Best efforts sale A relatively new IPO selling method has developed: the unsyndicated stock offering. Under this arrangement, the issue is sold to institutional investors by an underwriting syndicate. 100% of the issue is sold to institutional investors by a single underwriter. the entire issue is sold to both individual and institutional investors by an underwriting syndicate. 100% of the issue is sold to individual investors by a single underwriter.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Assume that a stock-issuing firm has a choice between a private placement selling the shares for $47.50 per share or a best efforts offering that will
sell all available shares at the prices described in the following probability distribution:
Best efforts expected probability distribution
Probability
Selling price
30%
Lowest quoted price
Mid-range price
Highest quoted price
Private placement
45%
O Best efforts sale
25%
Assuming that the issue is fully subscribed, or sold, which method would generate the most capital for the issuing firm?
$44.00
$46.00
$49.00
A relatively new IPO selling method has developed: the unsyndicated stock offering. Under this arrangement,
O the issue is sold to institutional investors by an underwriting syndicate.
100% of the issue is sold to institutional investors by a single underwriter.
O the entire issue is sold to both individual and institutional investors by an underwriting syndicate.
O 100% of the issue is sold to individual investors by a single underwriter.
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