How much will a firm recive in net funding How much will a firm receive in net funding from a firm commitmentunderwriting of Fairfax Corporation's 180,000 shares priced to thepublic at $55 if an 8% underwriting spread has been added to the pricepaid by the underwriter? Additionally, the firm pays $750,000 in legalfees.A. $8,530,000B. $9,090,000C. $9,840,000D. $8,358,000

To calculate the net funding the firm will receive from the firm commitment underwriting, we need to…

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter12: The Cost Of Capital

Section: Chapter Questions

Problem 17P

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How much will a firm receive in net funding from a firm commitment underwriting of 300,000 shares priced to the public at $30 if a 10% underwriting spread has been added to the price paid by the underwriter? Additionally, the firm pays $600,000 in legal fees.
What is the underwriter's spread per share on the issue for this financial accounting question?
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Rock Industries has hired the investment banking firm to help for going public. Rock and investment bank agree that Rock's current value of equity is $75 million. Rock currently has 5 million shares outstanding and will issue 2 million new shares. Investment bank charges a 7% spread. What is the offer price based on this information? a. $10.93 b. $15.00 c. $14.59 d. $10.71
An investment bank pays $42.80 per share for 5.3 million shares of GM Company in a firm commitment stock offering. It then can sell those shares to the public for $52 per share.How much money does GM receive?
Hasting Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.4 (given its target capital structure). Vandell has $10.82 million in debt that trades at par and pays an 8% interest rate. Vandell’s free cash flow (FCFJ is $2 million per year and is expected to grow at a constant rate of 5% a year. Vandell pays a 40% combined federal and state tax rate. The risk-free rate of interest is 5%, and the market risk premium is 6%. Hasting’s First step is to estimate the current intrinsic value of Vandell. What are Vandell’s cost of equity and weighted average cost of capital? What is Vandell’s intrinsic value of operations? [Hint: Use the free cash flow corporate valuation model from Chapter 8.) What is the current intrinsic value of Vandell’s stock?
A company has EBITDA of $100m. If a private equity fund acquires this company in a Leveraged Buy-Out for an EBITDA multiple of 3x, borrowing 50% of the purchase price, and sells the company for a multiple of 5x when the company's EBIDTA has increased to $150m, what will be the value of the equity investment in the company upon exit? What is it as a multiple of the initial equity investment? 8)
A firm is making an initial public offering. The investment bankers agree to a firm-commitment underwriting for 420,000 shares that would be priced to the public at $38 per share. The underwriter’s spread is 6 percent. What will be the proceeds for the issuer and the underwriter? Proceeds for the issuer $ Proceeds for the underwriter $
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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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