Problem 5-8Magenta Corporation wants to raise $51 million in a seasoned equity offering, net of all fees. Magenta stock currently sells for $10 pershare. The underwriters will require a spread of $0.5 per share, and indicate that the issue must be underpriced by 5 percent. Inaddition to the underwriter's fee, the firm will incur $2,000,000 in legal, accounting, and other costs. How many shares must Magentasell?Note: Enter your answer in millions rounded to 3 decimal places.Number of sharesmillion

A seasoned equity offering is when a company already listed on a stock exchange issues new shares to…

Answered: Magenta Corporation wants to raise $51…

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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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?
Eagle Security Co. has just gone public. Under a firm commitment agreement, the firm received $36.50 for each of the 7.25 million shares sold. The initial offering price was $38.75 per share, and the stock rose to $42.65 per share in the first few minutes of trading. The firm paid $2,285,000 in direct legal and other costs and $988,000 in indirect costs. What was the underwriters' spread of this offer?
Zyra Company is conducting an initial public offering of 2,500,000 shares. Zyra Company already had 4,000,000 issued and outstanding shares, The new IPO shares shall be sold at P3 per share. What is the tax on initial public offering?
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
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Young Corporation stock currently sells for $20 per share. There are 1 million shares currently outstanding. The company announces plans to raise $4 million by offering shares to the public at a price of $20 per share. a. If the underwriting spread is 8%, how many shares will the company need to issue in order to be left with net proceeds (before other administrative costs) of $4 million? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. Number of shares 217,391 b. If the under writing spread is 8% and the other administrative costs are $45,000, what is the dollar value of the total direct costs of the issue? Note: Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Total direct costs c. If the share price falls by 4% at the announcement of the plans to proceed with a seasoned offering, what is the dollar cost of the announcement effect? Note: Enter your…
LYFT IPO was issued at $72/share. Before the IPO, Lyft had 240 million class A shares outstanding and wanted to issue additional 30 million class A shares. On top of that, Lyft gave its underwriters options to purchase another 5 million shares at $72 each. When Lyft stock price fell below the IPO price of $72, to support the stock price, up to how many shares the underwriters could buy from the open market without losing money? 5 million shares 30 million shares 35 million shares 240 million shares 275 million shares
Cullumber, Inc., a high-technology firm in Portland, raised a total of $60 million in an IPO. The company received $27 of the $30 per share offering price. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs were $350,000. The firm’s stock price increased 17 percent on the first day of trading. What was the total cost to the firm of issuing the securities?
Damron, Incorporated, has 205,000 shares of stock outstanding. Each share is worth $79, so the company’s market value of equity is $16,195,000. Suppose the firm issues 44,000 new shares at the following prices: $79, $73, and $67. What will be the ex-rights price and the effect of each of these alternative offering prices on the existing price per share?
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
United Uninsured Underwriters (U3) needs $192 million to stay in business. If new common stock is issued, U3 must pay its investment banker a fee equal to 8 percent of the total amount issued. The new issue will also require Us to pay $280,000 in fees to its lawyers, printing costs, and other costs associated with the issue. U3 can issue stock at $25 per share. How many shares of common stock must Us issue so that it has $192 million after flotation costs? Show how much of the total dollar amount of the issue will be flotation costs and how much U3 will receive after the flotation costs are paid.
Mini, Inc., earns pretax book net income of $1,420,000 in 2021, its first year of operations. Mini recognized $226,400 in bad debt expense for book purposes. This expense is not yet deductible for tax purposes. Mini reports $1,491,000 of pretax book net income in 2022. Mini did not recognize any bad debt expense for book purposes in 2022 but did deduct $169,800 in bad debt expense for tax purposes. Mini reports no other temporary or permanent book-tax differences. The applicable U.S. Federal corporate income tax rate is 21%, and Mini earns an after-tax rate of return on capital of 4%. Enter below the 2022 end-of-year balance in Mini's deferred tax benefit or expense and total tax benefit or expense. If an amount is zero, enter "0". If required, round your answer to nearest whole value. 2022 a. Total tax benefit or expense h. Deferred tax benefit or expense c. In net present value terms, what has been the cost to Mini of the deferred tax deduction for bad debts? The present value factor…

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