b) Answer parts i and ii based on the information below: Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement. How many shares does the company have to issue to achieve its capital raising goal? Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively? i.

b) Answer parts i and ii based on the information below: Zoom Delivery Ltd, an online parcel delivery service is expanding rapidly after the pandemic caused by Covid-19. It is planning to raise $35 million (this is the net amount required) to finance its business expansion. The offer price is $20 per share to the public and the underwriter charges 7% spread with a standby underwriting arrangement. How many shares does the company have to issue to achieve its capital raising goal? Assume that the issue becomes unsuccessful, as they only receive 95% subscriptions of the total number of shares offered. What would be the total proceeds and how much would the company and the underwriter receive respectively? i.

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

Problem 1PS

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Raybac is about to go public. Its present stockholders own 500,000 shares. The new public issue will represent 700,000 shares. The shares will be priced at $25 to the public with a 5% spread. The out-of-pocket costs in addition to the spread will be $450,000. What are the total per-share underwriting fees to the investment banker?
XYZ Inc., a firm with 4 million shares outstanding each earning $5 in an industry that has an average P/E ratio of 4, has hired an investment-banking firm to help it go public. XYZ will issue 1 million new shares and incur $450,000 in indirect costs combined with 7%-spread fees charged by the underwriter. What is the correctly valued offer price of the IPO?
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Marker, Incorporated, wishes to expand its facilities. The company currently has 5 million shares outstanding and no debt. The stock sells for $40 per share, but the book value per share is $53. Net income is currently $3.6 million. The new facility will cost $20 million, and it will increase net income by $280,000. The par value of the stock is $1 per share. Assume a constant price-earnings ratio. a-1. Calculate the new book value per share. Assume the stock price is constant. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a-2. Calculate the new total earnings. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) a-3. Calculate the new EPS. Include the incremental net income in your calculations. (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) a-4. Calculate the new stock price. Include…
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Caspian Water needs to raise $59.00 million by issuing additional shares of stock. If the market estimates Caspian Water will pay a dividend of $2.12 next year (D1 2.12), which will grow at 3.99% forever and the cost of equity to be 12.82%then how many shares of stock must the firm sell? 1 ) None of the answers in this list is within 100 shares of the correct answer 2) 312,890 3) 2,457,406 4 ) 4,128,970 5 ) 915,939 6 ) 2.975,934
Express Courier (EC) needs $141 million to support future growth. If it issues common stock to raise the needed funds, EC will have to pay its investment banker flotation costs of 6% of the issue's total value. If EC can issue common stock at a market price of $80 per share, how many shares must be issued so that the company has the $141 million that it needs? There are no other issuing expenses or fees in the offering. Jewel Regal Cars (JRC) must raise $240 million to support operations. To do so, JRC plans to issue new bonds. Investment bankers have informed JRC that the flotation costs will be 4% of the total amount issued. If the market value of each bond is $1,000, how many bonds must JRC sell to net the $240 million that it needs? There are no other issuing expenses or fees in the offering. Mom's Motel Corporation (MM) plans to issue bonds to raise $175 million that it needs to support future operations. MM's investment banker will charge flotation costs of 2.5% of the…
Assume Merck is announcing that it is currently in the approval phase of a Covid19 medication. A part from Merck, there is still a number of other firms competing for anapproval. If Merck is successful in being the first one getting the approval, its future freecashflow is expected to increase by EUR 800 million over the next 3 years. Pfizer has currently9 million shares outstanding at a share price of EUR 32, EUR 50 million debts and acost of capital of 7%. What do you think will happen if the market learns that Pfizer was thefirst one getting the approval for the vaccination?
7. Your company is currently contemplating whether to buy Hot House, a national chain of computer systems consultants based in California. Your job is to estimate the market value of the equity in Hot House. To accomplish this task, you have gathered the following information. The estimated FCFF generated by Hot House for each of the next five years are as follows. CFF 1 $2,400 2 3 4 5 $2,910 $3,452 $4,452 $5,352 Subsequent to year 5, you estimate that the cash flows will grow at 6% indefinitely. Currently, the company has $5 million of debt outstanding, but that debt balance is expected to increase by 5% at the end of each year. Thus, the current debt balance of $5 million will increase to $5.25 million at the end of year 1, $5.5125 million at the end of year 2, etc. Fortunately, the before-tax cost of debt is expected to remain stable at 12%. Finally, you estimate that the required return on the unlevered equity is 16%. If the company has 1 million shares outstanding, what is the…
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