In its IPO, 1 million company shares were issued at a price of $25 per share. The underwriter's fee for the offering was 8% of gross proceeds and the issuer incurred direct out-of-pocket costs of $400,000. In the aftermarket on the first day of trading the closing share price was $32. What was the total issue cost as a percent of the issuers proceeds net of all costs?
In its IPO, 1 million company shares were issued at a price of $25 per share. The underwriter's fee for the offering was 8% of gross proceeds and the issuer incurred direct out-of-pocket costs of $400,000. In the aftermarket on the first day of trading the closing share price was $32. What was the total issue cost as a percent of the issuers proceeds net of all costs?
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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Transcribed Image Text:In its IPO, 1 million company shares were issued at a price of $25 per share. The underwriter's fee for the offering was 8% of gross proceeds and the issuer incurred direct out-of-pocket costs of
$400,000. In the aftermarket on the first day of trading the closing share price was $32. What was the total issue cost as a percent of the issuers proceeds net of all costs?
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